10% ownership analysis

[bennycx]

Looking at how Buffet decides on whether to keep holdings below 10% ownership e.g. PSX, WFC, etc, it seemed that Buffet really liked American Express a lot. For e.g. he seeks permission to own more AXP but gives up on PSX easily to keep below regulatory requirements. Also understand that WFC is a different situation altogether.

Is there a different way of understand this, that AXP is one of his most fav stock?

[Munger_Disciple]

Unrealized gains on AXP position are way higher, so it does not make sense to sell the position. Buffett has not added to the AXP position in ages. Got to be above 10% due to buybacks.

 

In the case of Wells Fargo, Berkshire has not received the necessary approval from the Fed to go above 10% and still not be regulated as a bank holding company. After waiting 2 years, they gave up and started selling enough shares to stay below 10% so that Berkshire is not regulated as a bank holding co.

[aws]

Buffett did add to the position a little after it was already above 10%, but it was a small addition.  In 1997 they reported a 10.7% stake in AXP, and then in 1998 added 1.08 million shares (3.24 million split adjusted).  There was a sharp drop that summer and he was able to pick up some more shares for around $24/sh.  It recovered quickly though and probably beyond where he wanted to add any more.  Since then he hasn't bought or sold a single share.

[gfp]

Remember that American Express wasn't a bank until the financial crisis, so it wasn't an issue for Berkshire to be considered a bank holding company through their Amex holdings.  WFC always had to be kept below 10% but Berkshire sought permission to let it drift higher through repurchases only.  The Fed didn't grant it.

 

PSX wasn't the same issue and Buffett chose to take it much higher than 10% before changing his mind about the regulatory burden.  I suspect it had more to do with Energy regulators than SEC reporting requirement for 10% owners, as Buffett really likes PSX management and has taken quite a few other positions over 10%.

 

I certainly wish he hadn't sold the most recent big block of PSX back to the company in the low 90's.