This story was originally published by ProPublica.
It was the kind of endorsement most companies dream of. Berkshire Hathaway CEO Warren Buffett, the legendary investor known as the Oracle of Omaha, repeatedly
sang the praises of Wells Fargo in an interview with Fortune. The bank, Buffett said, “has come closer” to an effective business model “than any other big bank by some margin.” He detailed the ways in which Wells Fargo was more valuable than it seemed and compared its chair to Walmart founder Sam Walton.
The interview was published on April 20, 2009. Banks were still reeling from the financial crisis, stock markets were turbulent, and Buffett was the kindly white-haired billionaire who had assured Wall Street, the U.S. government and the public that America would be just fine. It was Buffett who had proposed the idea that turned into the $250 billion federal bailout that had propped up America’s banks (including Wells Fargo).
Berkshire was already one of Wells Fargo’s largest shareholders, and Buffett was
so influential that, Fortune noted, he had “caused a 20%-plus jump in Wells shares” the previous month “simply by expressing confidence in the bank on TV.” After the Fortune interview appeared, a similar pattern ensued: Buffett’s comments rippled across financial media, eagerly lapped up by the legion of investing fans who followed his every move. By April 24, Wells Fargo shares had jumped 13%.
That day, Buffett privately sold off $20 million worth of Wells Fargo shares in his personal account.
It has long been known that Buffett keeps a personal stock portfolio, separate from his company’s holdings. But what’s inside of it has always been a closely guarded secret. Buffett’s hand-picked biographer, Alice Schroeder, told ProPublica that he gave her access to nearly everyone and everything in his life — except his personal investing records.
Over the years, Buffett has been unequivocal about one aspect of his personal portfolio: He has repeatedly said he steers clear of trading stocks that his company is trading. “I can’t be buying what Berkshire is buying,”
he has said. Doing so, he stated on another occasion, would pose a “
conflict” of interest. If he buys a stock before Berkshire does, for example, he could be enjoying a better stock price than his shareholders, since a big stock purchase by Berkshire will tend to increase prices.
But roughly two decades of Buffett’s personal trades were included in a leak of IRS data obtained by ProPublica. Those records show that the nation’s best known and most respected investor has sometimes said one thing in public and done another in private.
On at least three occasions, Buffett has traded stocks in his personal account in the same quarter or the quarter before Berkshire bought or sold shares of the same companies, doing so before the conglomerate’s moves were disclosed to the public.
These trades may violate
Berkshire’s ethics policies, authored by Buffett himself, which require “all actual and anticipated securities transactions of Berkshire” be publicly disclosed before Berkshire employees can trade the stocks personally.
Overall, Buffett’s records show he reported at least $466 million in personal stock sales between 2000 and 2019. That’s a relatively modest sum for a person reported to be worth more than $100 billion (and indeed the records reveal vastly more trades in government and corporate bonds than in stocks). But the records include only securities he sold, not those he bought and held, so the portfolio is likely larger than ProPublica could see.
The trading records offer an unprecedented window into how America’s most iconic investor manages his personal portfolio. Buffett did not respond to detailed written questions about his personal trades.
Buffett has in the past
described the process of finding a stock for his personal account in amorous terms: “It’s like finding a new girl to me.” But, at a
Berkshire shareholder meeting in 2016, he waved away speculative questions about his personal trading by saying that the vast majority of his money is in shares of Berkshire, not his personal account, and that he planned to donate almost all of his billions in wealth to charity anyway.
Continue Reading…
