Warren Buffett and Berkshire Hathaway cut Wells Fargo shares as Barrick Gold looks more attractive amid rising inflation.
The head of Berkshire Hathaway sold 100 million shares of Wells Fargo, significantly reducing his stake in this financial institution. The Sage of Omaha, as Buffett is often referred to for his precise investment decisions, continues to diminish his presence in the banking sector and show an interest in gold and everything related to it.
Berkshire sold $ 32 billion in Wells Fargo shares, according to media reports. Now the investment company owns 3.3% of the lender’s shares for a total of $ 3.36 billion.
Why Buffett turned against Wells Fargo and what does Bitcoin have to do with it
Over the course of his career, Buffett has emphasized the importance of assessing the company’s long-term potential and cash flow. He usually prefers companies with predictable and stable operations that generate sustainable profits.
Wells Fargo reported losses of $ 2.4 billion in July, the first since the 2008 crisis. Following a weak quarterly report, the company said it would cut its dividend to 10 cents per share.
This month, Moody’s downgraded the bank from stable to negative, citing a slow process of reorganizing its governance system. Allen Tischler, analyst at Moody’s, noted:
“The outlook revision reflects a slower-than-expected pace of Wells Fargo addressing governance, oversight, compliance and operational risk management deficiencies. Slow growth is weighing on its costs, further diminishing its profit potential amid difficult market conditions. “
The combination of quarterly losses, dividend cuts, and worsening outlook likely prompted Buffett to make this decision.
At the same time, Barrick Gold has been flickering more and more frequently in Berkshire’s portfolio of reshuffles. While reducing its presence in the US banking sector, Buffett is stepping up gold purchases and Japanese trading companies.
This suggests that Buffett is looking not only for stable cash flows, but also for inflation protection. The investment in Barrick Gold reinforces the bullish long-term outlook for Bitcoin. The coin is often viewed as a digital version of gold and a reliable store of value. The close correlation between the price of the precious metal and the crypto asset after the March collapse confirms this.
Bitcoin vs gold
According to the Winklevoss brothers, in the future, bitcoin will “absorb” gold. In particular, they note that bitcoin has huge growth potential, which makes it an attractive investment. For example, BTC’s market cap is still roughly 1.5% of gold.
Cameron Winklevoss, co-founder of the Gemini cryptocurrency exchange, noted that bitcoin has already won some of the positions from the precious metal. He said:
“Bitcoin has already outstripped gold: in ten years of its existence, it has gone from project documentation to capitalization of over $ 200 billion. For the next ten years, he will continue to actively push for gold. “
Investing in gold and bitcoin is also recommended by the bestselling author and investor Robert Kiyosaki, who at the end of May recommended to his Twitter followers to buy gold, silver and bitcoin .