Why Buffett likes banks as an investment, with a caveat


FRI, APR 05, 2019


Buffett confident banks will be worth "more money" in 10 years


Warren Buffett is still bullish on banks.


In an interview with Yahoo Finance's Andy Sewer, Buffett said, "I think, ten years from now, that they’ll be worth more money. And I feel there’s a very high probability I’m right."


But don't set your expectations too high. "I don’t think that it will turn out to be the best investments at all, of the whole panoply of things you could do, but I’m pretty sure that they won’t disappoint me."


How Jamie Dimon is beating Buffett 


Buffett demonstrated his confidence in the banking sector in general, and JPMorgan Chase in particular, last year when Berkshire bought a $4 billion stake in the bank headed by Jamie Dimon. (Berkshire also owns around $26B of Bank of America and $21B of Wells Fargo.)


Dimon's expansive annual letters to shareholders are often compared to Buffett's own letters, and Buffett himself is a fan.


Dimon's latest letter came out this week. Among many other topics, he wrote that while capitalism has its flaws and does need some regulation, "Socialism inevitably produces stagnation, corruption and often worse – such as authoritarian government officials."


Who's writing the most? Quartz did a comparison and found that while Buffett's letters are getting shorter - down more than 50% over four years to just 14 pages - Dimon's letters are getting longer, clocking in at 50 pages this time around.


Speculation about a Buffett bid for Delta continues



After Delta Air Lines announced a 10-year extension of its credit card partnership with American Express, Stifel airline analyst Joseph DeNardi said the deal makes it more likely Berkshire will buy the airline.


And in an appearance on CNBC, BK Asset Management's Boris Schlossberg said he's bullish on Delta mostly because it's a "very stalwart part" of an increasingly profitable airline sector. But he also said speculation of a Buffett bid makes it "a potential takeout play" as well.


Berkshire has big stakes in four U.S. airlines, with takeover speculation centering on Delta and Southwest.


  • "The Berkshire empire is quietly collaborating more than ever," reports The Wall Street Journal (subscription required). While there's never been any coordination from the home office in Omaha, the Journal says top executives at Berkshire units now "gather regularly to share strategies and best practices."  Buffett says he welcomes the collaboration but "I don't promote it."
  •  A Credit Suisse stock screen has identified some potential "elephant-sized" acquisitions for Buffett. CNBC.com says Target, CarMax, and Moody's are among the 141 companies that Credit Suisse's quantitative team came up with. They screened for characteristics they believe are good proxies for the things Buffett has favored in past buys. Bear in mind, however, that Buffett says there no "formula" that drives his decisions.



Warren Buffett has been liked the banking business for years. Here are just a few examples from the CNBC Warren Buffett Archive.


At the 1996 annual meeting, Buffett said banking "can be a very good business, when run right ... There's no magic to it. You just have to stay away from doing something foolish." (Many years later, Wells Fargo learned that lesson the hard way.)


In 2003, Buffett told shareholders that "banking has been a remarkably good business." Charlie Munger noted that while Berkshire had made "quite a few" billions on bank investments, "banking was a way better business than we figured out in advance."


In a 2012 CNBC interview, Buffett again said banking is a "good business," but predicted they wouldn't be as profitable as they were in recent years due to government-mandated leverage reductions.


Buffett warns that all banks, and especially all bank managers, aren't the same. At the 2002 meeting, he said that while some banks prosper under good management, "you have other banks that have been run by people that took them right into the ground."



Berkshire Hathaway Class A shares closed at $307,776 Friday, up 2.9% over the previous four weeks, and up 2.0% from one year ago.

Berkshire Hathaway Class B shares closed at $205.33, up 3.3% over the previous four weeks, and up 2.2% from one year ago.

The benchmark S&P 500 index closed at 2892.74 up 5.5% over the previous four weeks, and up 8.6% from one year ago.



Berkshire's top stock holdings by market value, based on today's closing prices. The number of shares held is as of December 31, 2018, as disclosed in the company's February 14 13-F SEC filing,except for Delta Air Lines, which is as of March 11, 2019. 


The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.




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