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What Buffett Knows About Bank Investing That You Don’t
The Street | March 14, 2012 | 03:29 PM EDT

In February, Warren Buffett made waves when he explained why a share lull in International Business Machines would benefit his $10.3 billion stock holding. After Wells Fargo and Bank of America passed Tuesday’s Federal Reserve stress tests, Buffett’s point may also apply to his biggest bank investments.

In his annual letter, the investment guru detailed his math on how to gain on stock swoons and share repurchases, using his investment in IBM as an example. After Wells Fargo boosted its dividend 83 percent and indicated accelerated buybacks on the heels of stress test results, Buffett’s largest bank holding may have a similar thesis, with a relevance to other Berkshire Hathaway investments in Bank of America, American Express, and U.S. Bancorp.

On Tuesday, Wells Fargo raised its quarterly dividend to 22 cents a share and indicated added buybacks to a 2011 program. Buffett owns 7.28 percent of Wells Fargo shares, worth $12.8 billion.

Other large Buffett investments in American Express and U.S. Bancorp also benefited from capital return programs approved by the Federal Reserve.

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