In a surprising move, Berkshire Hathaway Inc (NYSE: BRK.B), led by legendary investor Warren Buffett, has sold $1.5 billion worth of Bank of America Corporation (NYSE: BAC) stock.
This sale involved unloading 33.9 million shares, marking the first reduction in Berkshire’s holding in the financial giant since late 2019.
Despite this significant transaction, Bank of America remains a cornerstone of Buffett’s equity portfolio, holding a position second only to Apple.
Berkshire owns 10.8% of Bank of America
Berkshire Hathaway continues to be one of the largest shareholders in Bank of America, retaining 999 million shares worth nearly $43 billion.
This stake represents 10.8% of the bank, indicating that while Buffett’s firm has taken some profits, it remains strongly invested in BAC.
The sale of these shares was primarily driven by the stock’s impressive 35% gain since its low in mid-January, rather than a loss of confidence in the bank.
Berkshire Hathaway’s decision to trim its stake follows a similar move in May, when it reduced its holding in Apple Inc, citing tax considerations.
Buffett’s investment in Bank of America began in 2011 as a show of confidence in the bank’s recovery from the subprime mortgage crisis.
The bank’s solid performance and its attractive 2.27% dividend yield have continued to make it a valuable asset.
Buffett’s rationale and Bank of America’s recent performance
Warren Buffett, famously known as the “Oracle of Omaha,” has often praised Bank of America’s leadership and profit potential.
In a 2017 Berkshire Hathaway annual meeting, Buffett revealed that his decision to invest in BAC came during an unorthodox moment—while taking a bath—demonstrating his deep confidence in CEO Brian Moynihan’s management and the bank’s future growth prospects.
The timing of the sale aligns with recent positive news from Bank of America.
The bank reported second-quarter financial results that exceeded Wall Street expectations, driven by increased investment banking and asset management fees.
Although net interest income (NII) was down 3% for the quarter, management had indicated that this would likely be the low point, setting the stage for future improvement.
Analyst perspectives and future outlook
Following the strong second-quarter results, analysts at Oppenheimer have reaffirmed their bullish outlook on Bank of America, raising their price target to $49.
This new target suggests a potential 20% upside from the current price, reflecting confidence in the bank’s ongoing profitability and recovery.
While Warren Buffett’s Berkshire Hathaway has reduced its stake in Bank of America, the move appears to be a strategic profit-taking decision rather than a sign of declining confidence.
The bank remains a key component of Buffett’s investment strategy, reflecting its strong performance and potential for continued growth in the financial sector.
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