Why does Warren Buffett like banks

US investor legend Warren Buffett recently bought stocks from one industry in particular: banks. by Matthias Fischer

Warren Buffet bought numerous bank stocks through his private equity firm Berkshire Hathaway in the fourth quarter of 2018. The star investor is banking on an industry that has fallen out of favor with most investors since the financial crisis ten years ago. While Buffett was selling some of his Apple shares (click here for the article), he increased his stake in the US bank JP Morgan.

He also added to Bank of America, Bank of New York Mellon and PNC Financial. The fact that Buffett relies more heavily on banks is particularly noteworthy because the financial sector was already well represented in his investment portfolio. Now their share has increased again. It is noticeable, however, that Buffett only relies on large banks. One reason for this is probably that the banking landscape is in a state of upheaval and that the fintech companies are poaching new challengers in traditional business.

To emerge stronger from this phase of consolidation, you need size. Then the yields can be increased through economies of scale and synergy effects. Smaller institutions, on the other hand, will find it increasingly difficult, this also applies to Deutsche Bank and Commerzbank. Both papers are not on Buffett's shopping list. The two institutes have not yet got out of crisis mode and will find it increasingly difficult to play in the concert of the greats on their own.

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