Wells Fargo & Co (NYSE:WFC) has been hit hard by the fallout from the company’s fraudulent accounting scandal. Warren Buffett first took a stake in WFC stock way back in the 1990s. Today, his firm Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) owns a staggering 479.7 million shares of Wells Fargo, worth around $22 billion.
In recent weeks, WFC stock has tanked to its lowest level in 2.5 years. The stock has certainly lost much more in market cap than its $185 million fraud settlement.
Following Senator Elizabeth Warren’s intense grilling of CEO John Stumf in front of the Senate, a growing number of critics are now calling for Stumf’s resignation.
The scandal has scared investors, and it has undoubtedly has made Buffett uncomfortable as well. Now that the grisly details of the scandal have come out, the $22 billion question remains; just how uncomfortable is Buffett?
Traders have a lot riding on figuring out Warren Buffett’s next move. Here are three possibilities.
Next Warren Buffett Move: Sell Wells Fargo (WFC)
Most fund managers with such a large stake in a company would come out and publicly defend its actions or try to dismiss their impact. However, Buffett is taking a different approach.
“If I start commenting on that or anything else, it will lead down too many paths, so I will wait until November to speak out about it, the election or any other subject,” Buffett told Fox Business this week.
The surprising comment already has analysts and traders speculating that Buffett intends to cut ties with WFC.
Rafferty Capital analyst Dick Bove recognizes the warning sign. Bove points out that, while Wells Fargo CEO John Stumpf was being interrogated by the Senate Banking Committee, BRK.B investment manager Todd Combs joined the board of rival banking giant JPMorgan Chase & Co. (NYSE:JPM).
“He is clearly walking away from Wells Fargo,” Bove wrote of Buffett following the news.
Next Warren Buffett Move: Buy J.P. Morgan Chase & Co. (JPM)
If Bove is correct, Buffett could be laying…
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