Wells Fargo (WFC 2.73%) is one of Berkshire Hathaway's (BRK.A 0.64%) (BRK.B 0.54%) largest stock investments, and according to Warren Buffett's comments at Berkshire's recent annual meeting, there's no reason to believe that will change soon.

In this Industry Focus: Financials clip, Michael Douglass and Matt Frankel explain why Buffett is standing by the megabank.

A full transcript follows the video.

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This video was recorded on May 7, 2018.

Michael Douglass: Let's turn to topic No. 2: Warren Buffett's investments in Wells Fargo. Now, listeners, you've heard us talk quite a bit about Wells Fargo over the past, oh, I don't know, six to eight months, but particularly in the last couple of episodes. We've had quite a bit to say about the company. Warren Buffett, not surprisingly, was asked about Wells.

Matt Frankel: Yeah. It's actually interesting, I don't know if you were watching the live stream during this, but, when they were asked the question, the question was worded to the effect of, "At what point do you just give up and get out of Wells Fargo?" And the audience cheered the question more than they cheered Buffett's response. This is a very common question that people have about Berkshire's Wells Fargo investment. But, Buffett kind of gave the indication that not only does he not want to sell, he thinks Wells Fargo is going to do particularly well in the coming years. In fact, this morning, he told CNBC that he thinks Wells Fargo will outperform the other big banks over the next 10 years. He stopped short of telling investors to buy any more.

Essentially, Buffett thinks that the fake accounts scandal, the overcharging for mortgages, giving people auto insurance they didn't need, all those problems weren't the big issue. The big issue, Buffett thinks, is that management didn't react quickly enough when they found out there was a problem. Buffett points out that Berkshire Hathaway has over 370,000 employees, and he's not sure how many people are doing things wrong, but it's not zero. There's bad apples at every company. The key is that when management finds out about the problem, they need to react quickly to prevent it from becoming a massive fake accounts scandal like in Wells Fargo's case.

But Buffett seems confident with the new leadership at Wells Fargo. He pointed out that in the past, he's made investments in financial companies that have done even worse things. He mentioned American Express and Geico, and these have turned out to be some of his best investments of all time. So, he's encouraging investors to sit by and let the process play out.

Douglass: And, fair enough. Although, he did also sort of stop short of suggesting people buy more. He didn't say, "Wells Fargo, screaming buy."

Frankel: And it's also fair to point out that when American Express and Geico were having their issues, it was before Buffett invested in them.

Douglass: Right. So, there's a lot to disentangle there. I think you know my viewpoint on the company, so I'll just leave it at that.

Frankel: You won't find it in Michael's portfolio any time soon.

Douglass: No, certainly not.