I think it is always interesting to review some of the long-term positions in Berkshire Hathaway's (BRK.A, Financial) (BRK.B, Financial) portfolio, especially those holdings that may have flown under the radar.
The market seems to pay a lot of attention to Berkshire's most significant investments, but the amount of analysis and comment on smaller holdings is relatively non-existent.
A long-term bank holding
One of these smaller holdings was M&T Bank Corp. (MTB, Financial). Berkshire first acquired a position in the lender back in the early 1990s, when the business was acquiring other smaller institutions.
When he was asked about the holding at the 2000 Berkshire annual meeting of shareholders, Warren Buffett (Trades, Portfolio) responded by saying that one of the main reasons why he bought the stock was its CEO, Bob Wilmers:
"Bob is a terrific businessman, a terrific banker, and a terrific citizen. I've known him a long time. A good friend of Stan Lipsey, our publisher in Buffalo. Bob runs the kind of a bank that allows Charlie and me to sleep very comfortably. Someone once said there are more banks than bankers, which is something worth thinking about a little bit. But believe me, Bob is a banker and he's done a lot for Buffalo. And he runs — he's got a — he has a very big ownership position, which he achieved, at least in very large part, through purchase with his own money, as opposed to having options. He's got one of the largest ownership positions, probably, among the hundred largest banks in the United States."
The Oracle of Omaha went on to say that considering the manager's ownership position, and his track record of managing the bank astutely, it seemed likely that Berkshire would continue to hold the stock. Buffett said it was possible that the institution would continue to own the shares for at least 10 years.
Growth continues
As it turns out, Buffett underestimated the amount of time he'd end up holding the stock. According to Berkshire's 13F reports, the conglomerate sold the remainder of the position early last year, after holding the shares for nearly three decades. The CEO who Buffett believed in so much in, Wilmers, died in 2017, but his legacy lives on with the banking institution.
It is not clear why the Oracle of Omaha decided to sell the position. He did so around the same time that he sold the Buffalo News along with other newspapers. Buffalo News was the conglomerate's only other Buffalo-based businesses. Berkshire was also selling other U.S. banks from its portfolio at the same time, including holdings in JPMorgan Chase (JPM, Financial).
As such, it does not look as if the decision to sell was based on any company-specific reasons. It looks as if Buffett might have been wanting to reduce his exposure to the bank sector. After selling Buffalo News, one could also argue that he no longer had a competitive insight into the region's economy and, therefore, was less confident owning one of the region's banks.
Still, I think it is notable that Berkshire held on to this position through three recessions and a significant financial crisis. The lender has been a reliable dividend stock over the past couple of decades, as well as a steady growth investment. The shares currently offer an annual dividend yield of 2.7%. The stock has produced a total return of 4.3% per annum over the past 15 years compared to the average of 2.6% of the regional banking sector. Over the past decade, the stock has outperformed the index by 1% per annum. Excluding dividends, the stock has produced a compound annual return of 7.7% over the past two decades. Since the end of 1991, the investment has produced an annual capital return of 11%, excluding dividends.
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