Berkshire Hathaway’s (BRK.A) Warren Buffett is buying banks.
Buffett bought Bank of America (BAC) during the 3-months ended 6/30. His purchase prices were between $ 48.34 and $ 50.14, with an estimated average price of $49.6 for his 8.7 million shares. Now, the BAC position is small for Berkshire as it represents 0.7 % of Berkshire’s holdings as of 6/30. His holdings was 8700000 shares as of 2007-06-30.
Buffett has long been a fan of financials holding shares in Wells Fargo (WFC), M&T Bank (MTB) and HSBC Holdings (HBC). According to the site Gurufocus, Buffett has almost 40% of Berkshire’s holding in financials.
Buffett’s buying is indeed a sign not of a short term bottom in the sector, but of the long term health of it. While Buffett’s typical holding period for a common stock has nearly evaporated for his “forever” mantra of earlier years, he still has a multi year time frame which on Wall St. is an eternity.
It also indicates “value” now exists in financials, a sentiment I post on yesterday. Do not confuse “cheap” with “value”. A cheap stock is one that will not cost you much money to purchase. A value stocks costs what it costs to buy but it is worth much more, a significant difference.
5 replies on “Warren Buffett Buying Financials”
I personally favor BofA but have advocated buying financials more than a week ago at http://arohanvalue.blogspot.com/2007/11/financials-if-not-now-then-when.html
The problem of course is to avoid the names that may be ‘toxic’ but the degree of which may not be readily apparent. B Of A appears to be a reasonably safe name, somewhat removed from the sub-prime debacles
– Arohan
i really do not think you can go wrong with any of the big ones at this point
Quote -“i really do not think you can go wrong with any of the big ones at this point”
What about CitiGroup? From everything I hear, not only are they in a deep hole, but they’re still digging. They’re a bit scary, even if you look at it from a value point of view..
franklin,
it depends on your time frame. mine is years so with citi at decade lows and yielding 6%, i am a buyer here. it may drop a bit lower from here but long term it will be a winner for shareholders. same with BAC and WB.
BAC is down around 40% after a year. It seems clear that even Buffett got fooled, not realizing what sort of writedowns BAC would have because of its subprime mortgage positions. I would love to hear Buffett’s explanation of whether he was fooled. ISTM all he can say is, “Yup, they got me. But we are in this for the long run, as always.”