Wells Fargo
One of America's largest banks and Buffett's landmark value investment of the 1990s, demonstrating the margin of safety principle in action.
Wells Fargo & Company
Founded: 1852 (San Francisco) IPO: 1872 Buffett's Investment Period: 1990-2019 (30 years) Peak Holdings: ~$32B (2018)
Overview
Wells Fargo is one of America's "Big Four" banks, with branches in all 50 states. Buffett invested in Wells Fargo for 30 years, calling it the best bank investment he ever made.
Why Wells Fargo Has a Moat
1. Scale in Banking
Wells Fargo's 10,000+ branches create a scale advantage in consumer banking.
2. Cross-Selling Model
Wells built a business around selling multiple products per customer — banking, mortgages, brokerage.
3. Habit and Switching Costs
Consumers rarely change primary banks. Moving direct deposit, auto-pays, and relationships is painful.
4. Geographic Concentration
Particularly strong in the western US and Texas, with deep community roots.
Buffett's Investment
The Purchase (1990)
Buffett started buying Wells Fargo during the 1990-1991 banking crisis. The stock was cheap due to:
- Real estate losses in the Southwest
- Concerns about the bank's loan portfolio
- Panic selling by investors
Why He Bought
"Wells Fargo is the best-managed large bank in America. The CEO, Carl Casage, runs it with extraordinary discipline."
The 2008 Crisis
Wells Fargo survived the 2008 crisis better than most big banks because:
- No investment banking blowup
- Conservative lending practices
- Strong deposit base
Buffett publicly supported Wells Fargo during the crisis.
The Exit (2019-2020)
Buffett sold Berkshire's entire Wells Fargo stake in 2019-2020, citing:
- Changes in management
- New corporate governance issues
- Regulatory constraints
Performance
| Period | Return |
|---|---|
| 1990 Purchase | ~$400M cost basis |
| Peak Value | ~$32B |
| Hold Period | 30 years |
| Total Return | 80x+ |
Famous Buffett Quote
"Wells Fargo is the best bank. It's the one we want to own if we can buy it at the right price." — warren-buffett
Why It Fits Margin of Safety
Buffett bought Wells Fargo when:
- The market was panicking about real estate losses
- The stock traded below book value
- He had massive margin-of-safety on the purchase
This is a textbook case of contrarian-investing combined with margin-of-safety.
Related
- warren-buffett — Who called it his best bank investment
- margin-of-safety — The principle applied
- contrarian-investing — Buying during panic
- long-term-thinking — 30-year hold
- compounding — What patience produced