Warren Buffett missed out on $10 billion in gains by dumping Wells Fargo stock — but he probably doesn't regret cashing out

• Warren Buffett's Berkshire Hathaway missed out on $10 billion in gains by dumping Wells Fargo stock.
• Berkshire left another $5 billion on the table by exiting JPMorgan and Goldman Sachs in 2020.

Warren Buffett's Berkshire Hathaway missed out on about $10 billion of gains by dumping its Wells Fargo stock in 2020 and early 2021.

The famed investor's company owned 346 million Wells Fargo shares at the end of 2019, giving it a 8.4% stake in the bank. Berkshire virtually eliminated that position over the next five quarters, leaving it with only 675,000 shares at the last count.

Buffett and his team pocketed roughly $10 billion from the stock sales, based on Wells Fargo's average share price of $30 during the period. However, the bank stock has now rebounded to $58, its highest level since August 2018. If Berkshire had kept the position intact, it would be worth $20 billion today — almost triple its $7 billion cost base.

Notably, Berkshire owned 500 million Wells Fargo shares at the end of 2016. That stake would have been worth $29 billion today, making it the conglomerate's number-three portfolio holding after Apple ($153 billion) and Bank of America ($48 billion).

Regardless, Buffett probably doesn't regret selling Wells Fargo, despite being a shareholder for more than 30 years and counting it among his cornerstone holdings in the past. The investor castigated the lender's fake-accounts scandal as a "total disaster" in February 2020, accusing its executives of ignoring the problem when they should have raced to address it.

Wells Fargo's bosses also ignored Buffett's recommendation that they hire a CEO from outside Wall Street to avoid angering regulators. Moreover, Sen. Elizabeth Warren urged the Federal Reserve last year to dismantle the bank and blasted it as a "simply ungovernable" company with a "broken culture."

Given the numerous controversies clouding Wells Fargo's outlook, Buffett might be happy to have cut ties at a cost of $10 billion in gains.

Buffett sold several other bank stocks in 2020, as he was worried about the pandemic and feared Berkshire's stock portfolio was overexposed to the financial sector. For example, he exited JPMorgan and Goldman Sachs in 2020, two stocks that are now trading close to record highs.

Berkshire likely sold its JPMorgan and Goldman Sachs stakes for about $6.1 billion and $2.4 billion, respectively, based on their average share prices during the selling periods. If Buffett hadn't cashed them out, those two positions would be worth $9.5 billion and $4.7 billion each today.

In other words, Buffett's sales may have cost him a combined $15 billion in unrealized gains across only three holdings. Still, the investor has roughly doubled the $2.1 billion he plowed into Bank of America in the summer of 2020, meaning he didn't entirely miss the rally in bank stocks.

Read more: Value investor Adam Schwartz explains why Warren Buffett's Berkshire Hathaway slashed its JPMorgan and Wells Fargo stakes, cheers its record buybacks, and praises its patience