Warren Buffett’s Berkshire Hathaway, which has avoided major acquisitions in the financial sector in recent months, may have had a $3.5 billion two-day paper profit on six major banking and financial services investments.

The two-day rally in financial shares, which drove the broad S&P Financials Index 24 per cent, came as the government announced sweeping measures to rescue the financial system and restore confidence in shaky markets.

Shares of Wells Fargo & Company, the fifth-largest US bank and Berkshire’s second-largest investment as of June 30, rose 19pc over the last two days and touched a record high. That would have given Berkshire a $1.85bn paper profit on its reported 290.7 million share stake.

Berkshire would also have had a $1.12bn profit on its reported 151.6m share stake in American Express Company, the credit card and travel services company. Stakes in Bank of America, M&T Bank, SunTrust Banks and US Bancorp also gained value.

Buffett has long favoured investments in undervalued businesses with strong earnings and management. That has helped him transform Berkshire since 1965 from a failing textile maker into a conglomerate with at least 76 companies.

“He’s always felt Wells was very well-managed,” said Frank Betz, who oversees more than $800m at Carret/Zane Capital Management in Warren, New Jersey. “Why does he like banks? Like Willie Sutton said, it’s where the money is.”

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Banks and financial services companies accounted for about one-third of Berkshire’s $57.9bn of US-listed equity holdings as of June 30.

Berkshire generally discloses these holdings only in the middle of each calendar quarter.

At Berkshire’s annual shareholder meeting on May 3, Buffett said that in banking, “you need someone at the top whose DNA is very very much programmed against risk.”

Buffett didn’t agree this week to help bail out the insurer American International Group, which agreed to an $85bn government rescue after being felled by exposure to complex debt known as credit default swaps. Buffett has called derivatives “financial weapons of mass destruction.”

Berkshire generates about half its business from insurance, but is diversifying through acquisitions in other sectors.

On Thursday, it announced a tentative agreement for its MidAmerican Energy Holdings Company affiliate to buy Constellation Energy Group for $4.7bn in cash, after worries about trading bets caused the power supplier’s shares to fall by more than half this week.

Earlier this year, it paid Chicago’s Pritzker family $4.5bn for 60pc of Marmon Holdings, which makes such things as railroad tank cars, pipes, fasteners and wiring.

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