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Warren Buffett has sold 23% of his stake in Bank of America for about $10 billion since mid-July.
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Berkshire Hathaway’s stake in American Express is now more valuable than its bet on Bank of America.
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Buffett cashed in about 56% of his huge Apple bet in the first half of this year.
Warren Buffett has followed up the surprise divestment of his stake in Apple by taking a knife to one of his biggest assets: Bank of America.
The famous investor Berkshire Hathaway sold about 239 million shares, or about 23% of his stake in the banking giant, between July 17 and Oct. 2, Securities and Exchange Commission filings show.
Buffett94, sold the shares at prices ranging from about $39 to $44, netting about $10 billion in proceeds — and he may not be done selling yet.
Berkshire has reduced its stake from 1.03 billion shares to 794 million shares, reducing ownership from 13.2% to 10.2%. At Thursday’s close, the remaining shares were worth just over $31 billion.
If the conglomerate continues to sell and is no longer a 10% shareholder, it will no longer need to update the market within two days of most transactions involving Bank of America stock.
The Wall Street giant was Berkshire’s second-largest holding company after Apple at the end of June; the positions were worth approximately $41 billion and $84 billion each. Buffett’s piece of American Expressworth about $41 billion, is now more valuable than his bet at Bank of America.
Buffett’s iconic share in Coca-Colaworth $28 billion, could soon be worth more too, if divestitures continue or shares move in the right direction. Berkshire will reveal the contents of its portfolio starting in late September in a mid-November filing.
No explanation yet
The ‘Oracle of Omaha’ hasn’t publicly said why he’s dumping Bank of America, but there are a few plausible reasons. He may be taking profits after a good run: The stock is up about 50% over the past year, hitting its highest level in more than two years on July 17, the day Buffett started selling.
Buffett mentioned the prospect of higher capital gains taxes as one of the reasons to cash in on some of its Apple profits, and that could be true for Bank of America as well. Berkshire’s position in Apple was worth about $174 billion at the end of 2023, but Buffett and his colleagues cut it by 56% in the first half.
Based on the cost basis of those positions, Berkshire has more than his money increased fivefold on Apple and tripled it on Bank of America, and it has now realized a significant portion of those paper profits.
Buffett could also rebalance Berkshire’s $300 billion stock portfolio, in line with his smaller Apple bet. Or perhaps he was disappointed with Bank of America’s prospects; he is left some of his colleagues including JPMorgan and Goldman Sachs in recent years.
There is also a chance that he collects money to earn something Acquisition the size of an elephant. But Berkshire has plenty of dry powder for deals: at the end of June, it had a record $277 billion in liquid investments, after dumping $90 billion in shares in the second quarter.
Bathtub billions
Buffett’s bet on Bank of America dates back to 2011, when he came up with the idea of investing in the bank while taking a bath. He initially got stuck in the bank’s call center, but eventually reached CEO Brian Moynihan.
The pair agreed that Buffett would invest $5 billion in exchange for $5 billion in preferred stock with a 6% annual dividend, plus warrants to buy 700 million shares of common stock at a fixed price at some point over the next ten years.
Buffett exercised the warrants in 2017 and received more than $20 billion worth of common stock at a cost of about $5 billion, which he covered by repurchasing substantially all of his preferred stock.
True to his reputation as a bargain hunter, Buffett refilled its stake in Bank of America in 2020, when the pandemic-hit stock was trading around $25. He bought about $2.1 billion over twelve consecutive trading days.
He seems to have committed a murder on the investment, as he has now sold almost a quarter of it for about $40 per share. That is almost 60% more than its purchase price in the summer 2020and more than five times the $7 or so he paid for the bulk of the position using warrants.
Read the original article Business insider
