Can ASX investors learn from how Warren Buffett is responding to the market downturn?

When I find myself in times of investing trouble, Warren Buffett often comes to me. Speaking his words of wisdom, he says, let your portfolio be…

Warren Buffett is an inspiration to many an investor. But his wisdom is often bandied around most in times of market turmoil. Due to his famous penchant for making his largest investments in times of market turmoil, Buffett is perhaps the most opportunistic famous investor out there.

Thus, it would be interesting to check out how Buffett, and his company Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B), has fared over the past couple of months. We’ve recently covered how Buffett was the only top ten billionaire not to lose money over January. That fits rather nicely into his famous ‘two rules of investing’.

But a new report sheds another interesting light into the workings of Buffett’s share portfolio at Berkshire. According to the report in The Age newspaper, Berkshire’s best performing share over 2021 was none other than the US bank Wells Fargo & Co (NYSE: WFC). Wells Fargo gave its investors, Buffett included, a 2021 performance of 61%.

That was far better than Berkshire’s two largest holdings, Apple Inc (NASDAQ: AAPL) and another bank in Bank of America Corp (NYSE: BAC). However, unfortunately for Buffett, his bet didn’t pay out as much as it could have. According to the report, Wells Fargo was once Berkshire’s largest holding, and “routinely praised by the billionaire himself”.

Buffett’s Berkshire unloads a winner

However, a series of scandals reportedly led Buffett to whittle down Berkshire’s Wells Fargo position over the past few years. Berkshire reportedly only had 675,000 Wells Fargo shares as of 30 September, which was well below the 2019 peak of 323 million shares. As such, we can conclude that Buffett and Berkshire have had something of a missed opportunity with their Wells Fargo holdings.

According to The Age Article, Buffett, who has a famously high bar when it comes to a business’ integrity, wasn’t too impressed with the selection of Wall Street insider Charlie Scharf as CEO in 2019 after Buffett advised to pick someone outside of Wall Street. Charlie Munger, Buffett’s right-hand man at Berkshire, apparently criticised Scharf for planning to run the San Francisco-based bank from New York.

But that all seems a little immaterial now that Buffett has missed out on some potentially massive gains from Berkshire’s Wells Fargo position.

It just goes to show that even the best investors can miss out sometimes. But what is perhaps more important is how Buffett sticks to his investing principles. Even in the face of losing some face. It’s not all bad though. Bank of America shares, while not quite at the same performance level as Wells Fargo, still gave investors a near-50% return over 2021. Apple shares rose almost 34%. It certainly could be worse for Berkshire, and Buffett!

The post Can ASX investors learn from how Warren Buffett is responding to the market downturn? appeared first on The Motley Fool Australia.

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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