Warren Buffett and Berkshire Hathaway have significantly reduced their investment in Wells Fargo, selling 100 million shares. The Oracle of Omaha continues to downsize its position in banking stocks, supporting the bullish perspective on gold and Bitcoin (BTC).
According to Fox Business on September 5, Berkshire held $32 billion in Wells Fargo shares. The investment conglomerate now owns 3.3% of the bank’s shares, worth 3.36 billion dollars.
Why did Buffett get rid of Wells Fargo and how could it benefit Bitcoin?
Throughout his career, Buffett has emphasized the importance of value investing and cash flow. The investor usually prefers companies with stable, predictable operations that result in consistent profitability.
In July, Wells Fargo reported a loss of $2.4 billion, the first since the 2008 crisis. Following the disappointing quarterly report, the company announced a dividend cut to 10 cents per share.
This month, Moody’s changed its valuation from stable to negative, citing a slow process of governance reorganization. Allen Tischler, an analyst at Moody’s, explained:
„The change in outlook reflects the slower-than-expected pace at which Wells Fargo is addressing its governance, oversight, compliance and operational risk management deficiencies. The slow pace weighs on his spending base, further compromising his earning potential in difficult operating conditions.
The confluence of the quarterly loss, dividend cut and downsized outlook probably drove Buffett to reduce its position.
However, the recurring theme in Berkshire’s portfolio changes in recent months is the investment in Barrick Gold. While reducing exposure to the US banking sector, Buffett has invested in gold and Japanese trading companies.
The decision shows that Buffett is looking for security in terms of cash flow and a hedge against inflation. The investment in Barrick Gold supports Bitcoin’s bullish thesis, as the perception of the crypto asset as a store of value continues to improve, mainly due to the strong correlation with gold after the collapse in March 2020.
According to Winklevoss, BTC will „devour“ gold
Other major investors, including the Winklevoss cufflinks, believe that Bitcoin as „digital gold“ will challenge gold in the long term. Specifically, its immense upside potential makes it an attractive investment, since the market capitalization of cryptocurrency is around 1.5% of gold.
Cameron Winklevoss, co-founder of Gemini, stated that Bitcoin has already made great progress compared to gold:
„Bitcoin has already gained significant ground on gold, moving from a white paper to a market capitalization of over $200 billion in less than a decade. Over the next decade, it will continue to devour gold.“
As reported by Cointelegraph Markets last Monday, Wall Street veteran and presenter of the Keiser Report, Max Keiser believes Buffett’s abandonment of the dollar is a bullish signal for the price of gold and Bitcoin.
„Buffett’s move to Japan, along with his investment in gold, confirms that he is moving out of the USD,“ he explained. „Bitcoin, gold and silver will reach new historical highs in the short term“.