In a surprising move, Berkshire Hathaway has been on a selling streak, reducing its stake in Bank of America for nine consecutive days. This recent development has raised eyebrows as investors wonder about Warren Buffett’s strategy behind trimming this long-time holding. The conglomerate sold a significant 18.4 million shares of the bank over a four-day period, totaling $767 million at an average price of $41.65.
Even after the selling spree, Berkshire still maintains ownership of 961.6 million shares of BofA, with a market value of $39.5 billion. This makes Bank of America the second-largest equity holding in Berkshire’s portfolio, right after Apple. However, if the conglomerate continues to offload shares at this rate, BofA could potentially drop to the third position, behind American Express.
Historical Context
Warren Buffett’s relationship with Bank of America dates back to the aftermath of the financial crisis in 2011. During that time, Buffett made a significant investment of $5 billion in BofA’s preferred stock and warrants, instilling confidence in the struggling lender. This move eventually made Berkshire the largest shareholder in the bank after converting the warrants in 2017. Buffett had previously stated that it would be a “long, long time” before he made any sell-offs of this investment.
The conglomerate’s cost basis on the BofA position was disclosed at about $14.15 per share or $14.6 billion at the end of 2021. By the end of March this year, the holding had appreciated to $39.2 billion. With BofA’s closing price at $41.09 on Monday, Berkshire could be seizing the opportunity to cash in some profits considering the bank’s exceptional performance in 2024. Bank of America’s stock has surged by 22% this year, outperforming the S&P 500’s return of 14.5%.
As Berkshire Hathaway is gearing up to release its second-quarter earnings, investors eagerly await further insights into the conglomerate’s biggest holdings. With Buffett’s recent selling streak in Bank of America, it remains to be seen whether this is a strategic move or merely a profit-taking opportunity amidst the bank’s strong run. As Berkshire continues to adjust its portfolio, it will be interesting to observe how these changes impact the overall structure and performance of the conglomerate’s investments.