Warren Buffett’s investment conglomerate, Berkshire Hathaway, has been steadily selling off large portions of its holdings in Bank of America (BofA). Since mid-July, Berkshire has sold more than $7 billion worth of BofA shares, cutting its stake in the bank to 11%. This significant reduction in Berkshire’s position marks a strategic shift for the company, which had long held BofA as its second-largest holding.
Details of the Latest Sales-
In recent regulatory filings, it was revealed that Berkshire Hathaway offloaded a total of 5.8 million BofA shares in separate sales on Friday, Monday, and Tuesday. These sales generated nearly $228.7 million, with an average selling price of $39.45 per share. These transactions extend the company’s selling streak to 12 consecutive sessions, the same number of consecutive sales seen from July 17 to August 1.
To date, Berkshire has sold more than 174.7 million shares of BofA, netting approximately $7.2 billion. The Omaha-based conglomerate now holds 858.2 million shares, accounting for 11.1% of the bank’s outstanding stock.
A Shift in Berkshire’s Top Holdings-
Before these sales, Bank of America had long been Berkshire’s second-largest holding, behind only Apple. However, with this recent offloading, BofA has dropped to the third spot, trailing both Apple and American Express in Berkshire’s portfolio.
The History of Buffett’s Investment in Bank of America-
Warren Buffett’s relationship with Bank of America dates back to 2011, during the aftermath of the global financial crisis. At that time, the “Oracle of Omaha” made a bold move, purchasing $5 billion worth of BofA’s preferred stock and warrants. This investment came at a time when the bank was struggling with losses tied to subprime mortgages.
In 2017, Buffett converted those warrants into common stock, making Berkshire Hathaway the largest shareholder of BofA. Between 2018 and 2019, Berkshire increased its bet on the bank, adding an additional 300 million shares to its holdings. This made Bank of America a cornerstone of Buffett’s portfolio until the recent selling spree began in mid-2023.
Bank of America CEO Moynihan Comments on Buffett’s Selling-
In a rare comment regarding Berkshire Hathaway’s recent sales, Bank of America CEO Brian Moynihan addressed the situation during the Barclays Global Financial Services Conference on Tuesday. Moynihan acknowledged that he has no direct knowledge of Buffett’s motivation for selling.
“I don’t know what exactly he’s doing because frankly, we can’t ask him. We wouldn’t ask,” Moynihan stated, referring to the independent nature of Berkshire’s investment decisions. Despite the sales, Moynihan emphasized that the market is absorbing the stock. He added that Bank of America is also buying back portions of its own stock, signaling confidence in the bank’s long-term prospects.
Market Impact and Stock Performance-
Despite Berkshire’s continuous selling, Bank of America’s stock has shown resilience. Since the start of July, shares of BofA have dipped only 1%, a modest decline considering the volume of shares being sold. For the year, the stock is up 16.7%, slightly outperforming the S&P 500.
Moynihan’s remarks at the conference focused on the overall health of the market and Bank of America’s ability to absorb such a large volume of shares being sold. “The market’s absorbing the stock, and life will go on,” he remarked confidently.
Moynihan Praises Buffett’s Strategic Investment in 2011-
While Buffett’s recent sales may raise questions, Moynihan took the opportunity to reflect on the positive impact of Buffett’s 2011 investment in the bank. He described Buffett’s move as a crucial vote of confidence during a time when Bank of America was struggling.
“He’s been a great investor for our company, and stabilized our company when we needed it at the time,” Moynihan said. He credited Buffett with helping the bank weather the financial storm caused by the subprime mortgage crisis, which had severely impacted its balance sheet.
Moynihan highlighted just how lucrative Buffett’s 2011 investment has been. He noted that if investors had bought Bank of America shares on the same day that Buffett did, they would have been able to purchase shares for as low as $5.50 each. Today, those shares trade at just under $40, representing a massive return for long-term investors.
Buffett’s Legacy at Bank of America-
Moynihan concluded his remarks by acknowledging Buffett’s long-term vision and his ability to make bold, strategic investments. “He just had the guts to do it in a big way. And he did it. And it’s been a fabulous return for him. We’re happy that he gets it,” Moynihan said, expressing his gratitude for Buffett’s early and impactful support.
While Berkshire Hathaway may be reducing its stake in Bank of America, the long-standing relationship between the two companies remains a defining moment in Buffett’s storied investment career. As Berkshire shifts its portfolio, the market will undoubtedly keep a close eye on Buffett’s next move.
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