Did he, or didn't he?

Investors in Wells Fargo & Co. felt a definite spring chill after learning from a regulatory filing that legendary investor Warren E. Buffett had shaved his substantial holdings in the San Francisco banking company.

But some Wall Street analysts and other market sources are now suggesting that Mr. Buffett may not actually have sold 300,000 shares in Wells Fargo, about 5% of his stake in the bank, but instead shuffled them from one subsidiary to another under the umbrella of Berkshire Hathaway Inc., his investment vehicle.

Mr. Buffett, who is Berkshire Hathaway's chairman and chief executive, has a 40-year track record as one of the world's top stock pickers. He has a wide following among investors, and his market moves have immediate and important repercussions.

Indeed, they can magnify what is occurring fundamentally at a company. Last week, for instance, veteran banking analyst George M. Salem of Gerard Klauer Mattison & Co., New York, reduced his investment rating on Wells' stock to "hold" from "buy."

Mr. Salem said his primary reason for doing so was the "poor execution" of Wells Fargo's merger with First Interstate Bancorp, which occurred April 1, 1996, and the "meaningful harm" to its management from the unexpected resignation of president and chief operating officer William Zeundt.

But in his note to clients on the rating change, the analyst also asked: "Is Warren Buffett reducing his large Wells Fargo holdings?"

"While we do not know what Mr. Buffett's plans are for Wells Fargo shares, he may not be happy about recent trends in the company. If he continues to reduce his holdings, this could weigh heavily on the stock," said the analyst.

As has long been his custom, Mr. Buffett is not saying. Moves by the Omaha-based investment wizard are usually discerned only from matter-of- fact regulatory disclosure filings required of large shareholders by the Securities and Exchange Commission.

Mr. Buffett himself did not mention Wells Fargo during his most important public appearance of the year, his report to shareholders at the Berkshire Hathaway annual meeting last month.

But some Wall Street sources are tempted to read between the lines of the SEC filing because Berkshire Hathaway comprises 17 units, which include insurance companies Geico Corp. and Wesco Financial Corp.

Moreover, Mr. Buffett's highly successful investment strategy has never involved buying or selling shares on a short-term basis.

"I would not be surprised if it was an intercompany transfer," said Robert G. Hagstrom Jr., author of "The Warren Buffett Way," a best-selling book on Mr. Buffett's investing techniques.

"It seemed to be a small amount of stock, and Warren typically doesn't move in baby steps," said Mr. Hagstrom, who is president of the Focus Fund, Wayne, Pa., which seeks to emulate Mr. Buffett's stock-picking technique.

And another observer, a Wall Street analyst who asked not to be identified, said: "Berkshire Hathaway has many subsidiaries, and some are quite small. They may not have to report their institutional holdings."

Wells Fargo also declined to comment on any possible change in holdings by Berkshire Hathaway, which came to light in late May after Mr. Buffett's company filed its first-quarter disclosure report with the SEC.

On its surface, the 13F filing said Berkshire Hathaway had reduced its position in Wells Fargo by 300,000 shares-a minimal number considering Mr. Buffett still has 6.99 million shares.

Nevertheless, the market viewed the sale as a sign that Mr. Buffett was becoming dissatisfied with the company-which has surprised Wall Street by encountering difficulties in absorbing First Interstate.

Wells Fargo's stock plummeted 5% that day. Thursday, it closed at $254.75, far below its 52-week high of $320.50.

Since the SEC filing, however, seasoned Buffett observers have wondered whether the action was more technical than strategic.

Andrew Kilpatrick, author of "Of Permanent Value: The Story of Warren Buffett" and a Baltimore stockbroker for Prudential Securities, pointed out that Berkshire Hathaway vice chairman Charles T. Munger, who practiced law in California and is a longtime confidant of Mr. Buffett, continues to be upbeat about Wells Fargo.

At a Wesco Financial meeting in May, Mr. Kilpatrick said, the Berkshire Hathaway official offered some telling hints. "Mr. Munger said that you can't believe everything that you read," recalled Mr. Kilpatrick. "He also acknowledged the difficulties that Wells Fargo is having with its merger and added: 'All that will be gone in five years.'"

The broker said Mr. Munger also suggested the sale of Wells Fargo shares was a technical move associated with the First Interstate merger.

Mr. Buffett has taken similar actions in the past with his other holdings, such as the Federal Home Loan Mortgage Corp., better known as Freddie Mac.

"One year he sold a small amount of Freddie Mac," said Mr. Kilpatrick, "but another year we discovered that he had increased his position in the company. Every time he sells it doesn't mean it's negative."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.