Warren Buffett and Berkshire Hathaway have significantly trimmed their position in Wells Fargo, selling 100 million shares. The Omaha Oracle continues to expand its position in bank stocks and bolster the bull case for gold and bitcoin (BTC).
Berkshire reportedly held $ 32 billion in equity in Wells Fargo at one point, Fox Business reported on Sept. 5. The investment conglomerate now owns 3.3% of the lender’s equity, valued at just $ 3.36 billion.
Why did Buffett Wells cut Fargo and how could it benefit Bitcoin?
During his career, Buffett emphasized the importance of value investing and cash flow. The investor usually prefers companies with predictable and stable business processes that result in constant profitability.
Wells Fargo posted a loss of $ 2.4 billion in July, the first loss since the housing crisis of 2008. After the disappointing quarterly report, the company announced that it would cut its dividend to 1
This month, Moody’s downgraded its rating from stable to negative, citing the slow process it has been overhauling its governance. Allen Carpenter, a Moody’s analyst, said:
“The change in outlook reflects Wells Fargos’ slower than expected pace in addressing its governance, oversight, compliance and operational risk management deficiencies. The slow pace is putting a strain on the cost base and further undermining the earnings potential in the face of challenging operating conditions. “
The coincidence of the quarterly loss, dividend cut and downgraded outlook likely resulted in Buffett trimming his position.
However, the ongoing theme of the Berkshire portfolio restructuring over the past few months has been the investment in Barrick Gold. Buffett reduced his exposure to the US banking sector and invested in gold and Japanese trading companies.
The decision shows that Buffett is looking for security around cash flow and a hedge against inflation. The Barrick Gold investment is fueling Bitcoin’s bull fall as the perception of BTC as a store of value improves, especially given the close correlation between the two since the March 2020 crash.
Bitcoin versus gold price. Source: Skew
BTC would “cannibalize” gold in the future, says Winklevoss
Other well-known investors, including the Winklevoss twins, believe that Bitcoin as “digital gold” would compete against gold in the long term. In particular, its immense upside potential makes it an attractive investment as BTC’s market cap is still only around 1.5% of gold.
Gemini co-founder Cameron Winkelvoss said Bitcoin had already made significant ground on gold. He said:
“Bitcoin has hit significant ground in terms of gold – from the white paper to a market cap of over $ 200 billion in less than a decade. It will continue to exploit gold dramatically over the next decade. “
As Cointelegraph Markets reported last Monday, Wall Street veteran and moderator of the Keizer report, Max Keizer believes Buffett’s exit from the dollar is a bullish signal for the price of gold and bitcoin.
“Buffett’s move to Japan and his gold investment confirm that he is coming out of the USD strong,” he said. “Bitcoin – Gold – Silver will make all new ATH in the near future.”