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Senate Minority Leader Mitch McConnell can’t stop buying shares of this former darling of Warren Buffett

If you walk the halls of Capitol Hill, you’ll probably encounter a few millionaires along the way. More than half of members of Congress have a net worth of more than $1 million.

As you might expect, many representatives and senators are active investors. Senate Minority Leader Mitch McConnell is one of them. The Kentucky Republican can’t stop buying shares of this former darling of Warren Buffett.

A stock that Buffett used to love

The share I’m talking about is Wells Fargo (NYSE: WFC). For years, the big bank was one of Buffett’s favorite stocks.

The Oracle of Omaha first pre-purchased shares of Wells Fargo Berkshire Hathaway‘s portfolio in 1990. Bank stocks have been a big winner for Buffett and Berkshire over the years. Wells Fargo even looked like it could be a “forever stock” for Buffett.

However, when the bank’s fake accounts scandal came to light in 2016, Buffett did not immediately abandon his position in the stock. However, in the following years, he drastically reduced Berkshire’s stake in Wells Fargo, eventually selling all remaining shares in 2022. Buffett publicly stated that Wells Fargo had “built an incentive system that rewarded bad behavior.”

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Senator McConnell’s regular purchasing pattern

While Buffett sold Berkshire’s stock in Wells Fargo, Senator McConnell bought shares of the bank. The Kentucky senator has been buying up shares of Wells Fargo every quarter for years, even as the big bank’s scandals routinely made headlines.

Why has McConnell invested in Wells Fargo so regularly? There is a simple explanation: dividend reinvestment. Every quarter, the dividends paid out by the company are used to purchase additional shares.

However, although Senator McConnell reported these transactions, he was not the one who bought Wells Fargo stock. His disclosures revealed that the owner of the shares was his wife, Elaine Chao. She served as Secretary of Labor in former President George W. Bush’s administration and Secretary of Transportation during the Trump administration.

Should You Also Buy Wells Fargo Stock?

It looks like things are going well for Wells Fargo. Shares are up more than 40% in the past twelve months. The company has implemented new controls to prevent past issues from recurring. A consent order was withdrawn in February 2024 – a major milestone in Wells Fargo’s goal of putting the scandal behind it.

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Is the stock a good choice again, as it once was when Buffett was a big fan? I think income investors may find Wells Fargo attractive. The large bank offers a dividend yield of almost 2.5%. The dividend payout ratio stands at a low 28%, indicating enough flexibility to increase the payout in the future.

However, the potential of rate cuts later this year could negatively impact Wells Fargo’s interest income. The company’s profits fell year over year in the first quarter of 2024. Growth investors can now find better stocks to buy.

Should You Invest $1,000 in Wells Fargo Now?

Consider the following before buying shares in Wells Fargo:

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Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Keith Speights holds positions at Berkshire Hathaway. The Motley Fool holds positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Senate Minority Leader Mitch McConnell Can’t Stop Buying Stock of This Former Warren Buffett Darling was originally published by The Motley Fool

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