Warren Buffett has a huge following within the investing community, as his track record at Berkshire Hathaway is among the best in the business. Because Buffett is famous for trying to hold on to his best stock picks as long as possible, it's always noteworthy when the Oracle of Omaha decides to pull the trigger and sell some of his holdings.
Fortunately, those watching Buffett get a chance every three months to see the latest moves from Berkshire. Thanks to the quarterly disclosure rules that require Berkshire to file Form 13F, you can have a front-row seat with the rest of the world, as Buffett just announced his company's latest moves. Among the eight stocks in which he sold part of his holding, four bank stocks stand out -- including big reductions in two of them.
Minor sales: Bank of America and Bank of New York Mellon
Not all of the moves that Buffett made during the quarter were huge. Berkshire did make some minor reductions in its holdings of Bank of America (NYSE:BAC) and Bank of New York Mellon (NYSE:BK), and the sales might have been noteworthy if they'd been larger. However, the size of the sales barely registered in the context of Berkshire's holdings.
Specifically, Berkshire's sale of B of A stock amounted to just a small fraction of a percent of its massive holdings, which currently have a value of almost $33 billion. The sale brought Berkshire's stake in B of A below the critical 10% level, above which additional regulatory restrictions apply. For Bank of New York Mellon, Berkshire's sale cut its position in the stock by about 1.5%, but even so, Berkshire retained a more than $4 billion stake in the specialty bank.
A big slash: Goldman Sachs
Buffett made a much larger cut to Berkshire's holdings of Goldman Sachs (NYSE:GS). The insurance giant sold about a third of its shares of Goldman, taking the market value of its position in the bank down to below $2.8 billion.
The Wall Street giant has been a lucrative long-term holding for Berkshire, stemming from an opportunistic deal during the financial crisis in 2008 that proved to be highly advantageous. More recently, though, Goldman's stock has struggled, and even after a big rebound since late 2018, the investment banking giant's share price still lags well below its highs from 2017.
Losing confidence in Wells Fargo?
Finally, the most noteworthy sale in Buffett's portfolio was Berkshire's big reduction in its holdings of Wells Fargo (NYSE:WFC). This isn't the first quarter that the insurance giant has sold off shares of the beleaguered bank, but it did represent a continuation of a trend that Berkshire shareholders haven't seen lately.
During the fourth quarter of 2019, Berkshire sold more than 55 million shares of Wells Fargo, or about 14% of its holdings. That left Berkshire still holding more than $17 billion in the bank's stock. However, it took Buffett's stake in Wells down to around 7.3%. That's far below the 10% threshold that he seemed to track for quite a while, and it continues the downward trend we've seen in recent quarters.
Given the sluggishness with which Wells has tried to bounce back from its numerous scandals in recent years, it's hard to fault Buffett with not having enough patience with the bank. Nevertheless, for a company in which the Berkshire CEO has expressed confidence many times in the past, it's still jarring to see a clear about-face in sentiment from the billionaire investor.
Keep your eyes on Buffett's future moves
A lot of investors are looking closely at the big purchases that Warren Buffett made during the quarter. Yet with so much cash on hand at Berkshire to buy shares, the stocks Buffett decides to sell are even more noteworthy. His moves are useful not just for shareholders of the bank stocks he sold but also as a way of understanding how to manage a stock portfolio effectively over the long run.