Berkshire Chairman Warren Buffett seemed to go out of his way to dismiss the importance of the stress tests, saying Wells Fargo (WFC) and US Bancorp (USB) will prosper no matter what the results show.
“I think I know their future, frankly, better than somebody that comes in to take a look,” Buffett said yesterday.
It looks as if Mr. Buffett is aware that the stress tests will show both firms need additional capital and is therefore seeking to protect the short-term share value of his holdings, figuring that the stocks will take a hit on the news. WFC is Berkshire’s second-largest holding and the company also has a large stake in USB. Both banks have relatively large exposure in percentage terms of total loans (15.9% and 18.2% respectively) to the rocky commercial real estate market.
Longer term we agree WFC and USB will prosper. So if it does turn out that the shares take an immediate hit on the stress test results, it would represent a chance to get into both firms at a better price.
