Warren Buffett is one of the most legendary stock traders of the last 50 years.
A new report paints a different picture of Buffett, with potential private trades being made that could represent a conflict of interest.
What Happened: Buffett is the CEO of Berkshire Hathaway BRK BRK, a conglomerate that owns many companies across sectors and is also a top holder in several publicly traded companies.
When stock trades are disclosed by Berkshire Hathaway, the stocks often see a bump in price as traders attempt to follow Buffett's trading ideas.
A new report from ProPublica Thursday says confidential records show at least three occasions where Buffett sold stocks Berkshire was trading in his personal investment portfolio. The investigative journalism outlet said Buffett himself had previously said this would be a conflict of interest.
One instance highlighted by the report is a 2009 interview Buffett did with Fortune where he praised banking company Wells Fargo & Company WFC. The bank stock was a holding in the Berkshire Hathaway portfolio and shares had experienced several jumps as Buffett praised the stock during interviews.
The day the interview with Fortune was published, shares of Wells Fargo were up 13%. The report said Buffett sold $20 million in Wells Fargo stock in his personal stock account the same day.
ProPublica said it obtained the information reported Thursday from a a leak of IRS data that includes about two decades of Buffett’s personal trades.
A 2012 interview with CNBC saw Buffett asked why Berkshire Hathaway did not own JPMorgan Chase JPM stock, given Buffett's praise for the banking company.
"I'll let you in on a little secret," Buffett said. "I own some shares of JPMorgan."
Buffett said that because Berkshire didn't own shares of JPMorgan, he could do so without any potential conflict.
"That's one of the problems I have. I can't be buying what Berkshire is buying and I've got some money around and therefore I go into my second choices or into tiny little companies," Buffett said at a 2012 shareholder meeting.
Another personal trade mentioned in the report is Buffett selling $35 million in Johnson & Johnson JNJ shares in October 2012. The sale occurred in the same quarter that Berkshire Hathaway also had sold shares, which was disclosed in a later quarterly filing. Berkshire Hathaway went on to sell additional shares of Johnson & Johnson over the following two quarters.
ProPublica said this may have been against Berkshire's policy that employees who are aware of Berkshire altering a position are prohibited from trading that stock prior to a public disclosure from Berkshire.
The report also highlights a 2009 trade of Walmart Inc WMT stock. Buffett sold $25 million in Walmart shares in his personal stock portfolio, which came as Berkshire had doubled its stake in the retail giant, the report said. While Buffett’s trade was the opposite move from Berkshire’s, it creates questions of potential timing and insider trading and questions from investors on why Berkshire would be aggressively betting on the company if Buffett was himself selling.
Related Link: Warren Buffett Shares Advice On Succeeding At Life, Here's How Your Obituary Could Be Involved
Why It's Important: Buffett has not responded to the ProPublica report, which will likely be closely followed by the public.
The report comes after former Berkshire Hathaway employee David Sokol resigned in 2022 over allegations of insider trading. Sokol, who was considered a potential heir to Buffett's CEO role, was accused of buying shares of a chemical company prior to Berkshire Hathaway acquiring the company.
Buffett defended the personal trading rules that Berkshire Hathaway had in place at the time of Sokol's resignation.
"I don't think you'll find that the problem is in the rules. The problem is in people breaking the rules," Buffett said at the time.
Buffett said there was no evidence that other Berkshire Hathaway employees had made trades in companies around the time Berkshire Hathaway invested in them.
The legendary investor has been a stark opponent of anyone who would risk trading their reputation for potential profit from stock trading.
Buffett's private stock portfolio has been a well-kept secret that few have had access to, and it was something that Buffett's biographer Alice Schroeder was unable to view, according to the report.
"I can't be buying what Berkshire is buying," Buffett has previously said.
Berkshire Hathaway's ethics policies state that no employee can trade stocks personally before transactions of Berkshire are publicly disclosed. The policies were written by Buffett.
Time will tell if the reports of conflict of interest trades will harm the reputation of one of the world's most admired investors.
Image generated using AI via MidJourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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