USA TODAY International Edition
Buffett sticks by embattled Wells Fargo
Oracle of Omaha all but rules out paying dividend
Warren Buffett said Saturday that he’s sticking by embattled bank Wells Fargo and isn’t ready to jump into the risky business of insuring “cyber” catastrophes, and he all but ruled out paying a one-time special dividend to shareholders despite sitting on nearly $109 billion in idle cash.
The legendary investor and chairman and CEO of Berkshire Hathaway, now 87 years old, also reassured investors the company is built to last and will flourish when he’s gone. Buffett shot down inferences that Berkshire will have a tougher time striking acquisition deals after his run at the company is over and his longtime seal of approval fades from view. Berkshire’s appeal to companies with which it does business, he argued, is about its track record and deep pockets and not just the Buffett name.
“The reputation belongs to Berkshire,” Buffett said. “For somebody that cares about a business, we absolutely are the first call and will continue to be the first call.”
The billionaire’s comments came at the “Woodstock of Capitalism,” Berkshire’s annual shareholder meeting in Omaha. Tens of thousands of Buffett followers flocked to the rock star of investing’s hometown to hear his thoughts. He fielded questions from a packed Century Link Center with his right-hand man and Berkshire vice chairman, Charlie Munger, 94.
Who would replace Buffett has gained greater urgency since January, when he took a step toward announcing his successor when he promoted two longtime Berkshire executives, Greg Abel and Ajit Jain, as vice chairmen.
Highlights from the hotly anticipated question-and-answer session:
Downplays Wells Fargo woes
Buffett, who owns more than $29 billion of Wells Fargo stock, was asked what it would take to make him sell his shares in the bank, which has been embroiled in turmoil since its 2016 unauthorized-accounts scandal and more recent troubles, such as a $1 billion fine from regulators related to mortgage and auto loan violations.
Buffett reiterated that the company made a mistake by putting in the “wrong incentives.”
But he again stuck by the company: “I like it as an investment. I like (CEO) Tim Sloan as a manager. He is correcting mistakes made by other people.”
Buffett also noted that some of his best investments, such as American Express and GEICO, were in companies that had done bad things but then corrected them.
“I see no reason why Wells Fargo as a company, from both an investor standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes.”
Adds cyber risk to ‘super-cat’ list
In his annual letter in February, Buffett estimated there is a 2% risk of a $400 billion so-called super-cat insurance hit around the globe. And he added cyber risk to the usual list of suspects, typically natural disasters.
Still, Buffett said he’s in no rush to be a “pioneer” in the field of underwriting cyber insurance.
“Anyone that tells you they know in some actuarial way what ... (the) worst case is, is kidding themselves,” Buffett said, adding that the industry has a “pretty good idea of the probability of an earthquake in California or a hurricane hitting Florida, but I don’t think we or anyone else knows what we’re doing in cyber.”
Balks at dividend payout
Berkshire is sitting on $109 billion in cash that can be used to acquire other companies or be returned to shareholders in the form of dividends or stock buybacks.
Buffett likes to have a big cash hoard to ride out tough times and buy when prices are lower, but holding too much cash is muting Berkshire’s results. He long has said he’s always searching for “elephants,” or mega-deals. But Berkshire hasn’t closed a big deal since 2015.
Still, investors hoping Buffett, who is not a fan of dividends and hasn’t paid one in more than 50 years, would cave and give some cash back to investors came away disappointed.
“It would be very unlikely for us to pay a special dividend; a stock buyback is more likely,” he said.
Buffett made headlines a day ahead of the event by telling CNBC that Berkshire, which owns scores of businesses including ice cream retailer Dairy Queen, battery maker Duracell and auto insurer Geico, snapped up 75 million more shares of Apple in the first quarter, boosting Berkshire’s total Apple stake to an estimated $44 billion.
The Oracle of Omaha also weighed in other topics:
Guns: Buffett had to defend a comment he made in February, when he said Berkshire would not rule out doing business with people who own guns. But he stuck by his comment. “I do not believe in imposing my political opinions on the activities of our businesses.”
Trade: Despite recent trade tensions between the U.S. and China, he was optimistic the economic superpowers would work things out, as they have many common interests. “It’s a win-win situation when the world trades.”
Apple’s stock buybacks: Buffett backed Apple on its announcement that it plans on buying back $100 billion of its own stock. “We very much approve of them repurchasing shares.”
“I see no reason why Wells Fargo ... is in any way inferior to the other big banks with which it competes.” Warren Buffett