If Buffett Loves Jamie Dimon So Much, Why No JPMorgan Stock at Berkshire?
Reading Warren Buffett’s annual letter to Berkshire Hathaway (BRK.A) (BRK.B) shareholders is a lot like sitting through an Oscar acceptance speech – there’s a shout out to virtually everyone, including the 23 people who are counted as office staff at the Omaha headquarters – except one also gets some pretty smart investment insights.
How must it feel (stinging?) to be excluded from the effusive praise Buffett ladles out? James Hambrick over at Berkshire’s recently-acquired Lubrizol unit was shined up on page 3. Jain Ajit, the reinsurance guru, gets his usual stroking – “Charlie (Munger, Berkshire's vice chairman) would gladly trade me for a second Ajit. Alas, there is none.” – on page 9. Grady Rosier at the McLane distribution operation on page 13.
The overlooked Berkshire business unit manager must be weeping in his wife’s arms after Uncle Warren passes him over for praise; is the pink slip on the way?
Buffett also praises the occasional outsider. Byron Trott, a former Goldman Sachs (GS) investment banker, got the wet kiss in 2003 for helping with the McLane acquisition. And again in 2007 for helping with the Marmon deal.
Kidding aside, praising others shows Buffett's good manners. Other CEOs might take notice.
This year’s letter gives a shout out to Jamie Dimon, CEO of JPMorgan (JPM), for writing a swell letter to shareholders himself – log-rolling book blurbs come to mind, here – and for being a prudent man in making stock repurchase decisions. Seems faint praise but we all have our particular likes and dislikes. Buffett even told an interviewer that he has some JPMorgan shares in his personal account.
So where’s the JPMorgan at Berkshire? Nowhere as of the latest filings on major holdings.
Why could that be? Perhaps it’s because JPMorgan steadily trails the return-on-assets, a key ratio that reveals bank management acumen, of the four banks disclosed in Berkshire’s holdings, most notably Wells Fargo (WFC) and US Bank (USB). Two smaller Berkshire bank positions – M&T Bank, which just happens to boast a 3.5% dividend yield, (MTB) and Bank of New York (BK) – also outclass JPMorgan on return on assets. These smaller holdings are likely attributable to Buffett’s new helpers in portfolio management, but a Berkshire bet is a Buffett bet.
JPMorgan is also big in investment banking, with all the related risks. And Buffett well remembers his sour experience with Salomon Brothers.