Berkshire Hathaway Dumps $2.3 Billion of Bofa Shares in a Six-day Deal

This week, Berkshire Hathaway continued to sell off its shares in Bank of America, marking the sixth consecutive trading day that Warren Buffett's conglomerate has reduced its stake in the bank.

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Based in Omaha, Nebraska, the holding company offloaded another 18.9 million shares through transactions conducted on Monday, Tuesday, and Wednesday at an average price of $42.46 per share. This sale raised $802.5 million, according to a new regulatory filing.

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Over the past six trading sessions, Berkshire has sold a total of 52.8 million Bank of America shares, amounting to $2.3 billion. This reduction brings Berkshire’s stake in the bank down to 12.5%. Despite this, Berkshire still holds 980.1 million Bank of America shares, with a market value of $41.3 billion, which is significantly lower than its $172.5 billion holding in Apple.

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Berkshire is required to disclose its stock transactions within two business days when its stake in any company exceeds 10%.

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Buffett may be trimming his investment due to valuation concerns, as Bank of America, based in Charlotte, North Carolina, has outperformed the broader market this year. The bank's stock has risen more than 25% in 2024, compared to nearly 14% for the S&P 500.

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This is the first time since the fourth quarter of 2019 that Berkshire has reduced its stake in Bank of America. Back in 2011, Buffett invested $5 billion in the bank’s preferred stock and warrants to help boost confidence in the lender, which was struggling with losses related to subprime mortgages following the financial crisis.

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Even as recently as last year, Buffett spoke highly of Bank of America's leadership, even while selling other financial stocks. In 2022, Berkshire exited several long-held bank positions, including JPMorgan, Goldman Sachs, Wells Fargo, and U.S. Bancorp.

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In 2023, Buffett expressed his enduring confidence in Bank of America, saying, "I invited myself in, many years earlier, and they made a very decent deal for us. And I like Brian Moynihan enormously, and I just don’t want to, I don’t want to sell it."

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Berkshire's divestment activity began with an initial sale earlier in the week, where the company sold 18.9 million shares of Bank of America. This was followed by additional transactions over the next two days, each at an average price of $42.46 per share. The cumulative effect of these transactions has significantly reduced Berkshire’s holdings in the bank, generating a total of $802.5 million from these sales alone.

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Over a span of six trading sessions, Berkshire has strategically unloaded a considerable number of shares, totaling 52.8 million. This has effectively trimmed its stake in Bank of America to 12.5%, down from previous levels. However, even with this reduction, Berkshire remains a substantial shareholder, with 980.1 million shares valued at $41.3 billion. This makes it the second-largest holding in Berkshire’s portfolio, trailing only its substantial $172.5 billion investment in Apple.

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The requirement for Berkshire to disclose its trading activities stems from regulations that mandate disclosure within two business days when the company’s stake in any entity exceeds 10%. This transparency is crucial for stakeholders to stay informed about significant movements within the conglomerate's investment portfolio.

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The rationale behind Buffett’s decision to reduce his stake in Bank of America could be linked to valuation concerns. The bank’s stock performance has been notably strong this year, surpassing the broader market. Bank of America's shares have surged by more than 25% in 2024, outpacing the S&P 500’s nearly 14% gain. This outperformance might have prompted Buffett to capitalize on the favorable market conditions and reassess the valuation of his holdings.

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This marked the first reduction in Berkshire’s Bank of America stake since the fourth quarter of 2019. Buffett’s initial investment in Bank of America dates back to 2011 when he purchased $5 billion worth of the bank's preferred stock and warrants. This move was intended to stabilize the lender during a period of turmoil following the financial crisis, as the bank faced significant losses related to subprime mortgages.

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Despite the recent sales, Buffett has historically expressed strong support for Bank of America’s leadership. In 2022, even as Berkshire divested from other financial institutions like JPMorgan, Goldman Sachs, Wells Fargo, and U.S. Bancorp, Buffett praised the management of Bank of America. His continued confidence in the bank was evident when he stated in 2023, “I invited myself in, many years earlier, and they made a very decent deal for us. And I like Brian Moynihan enormously, and I just don’t want to sell it.”

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This strategic reduction in Berkshire's Bank of America stake highlights the dynamic nature of investment management, where valuation and market conditions play a crucial role in decision-making.

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