Berkshire Hathaway, led by Warren Buffett (Trades, Portfolio), has significantly reduced its stake in Bank of America (BAC, Financial), generating over $10 billion in profits since it began selling shares in July. Buffett first invested in the second-largest U.S. bank in 2011, and by July this year, his stake was at 13.1%, valued at approximately $45 billion. The latest sale has lowered his ownership to 10.1%.
This move comes amid economic uncertainty and potential recession concerns in the U.S., causing unease among other Bank of America investors. Since Berkshire’s initial sale in July, Bank of America shares have fallen nearly 7%, whereas JPMorgan Chase shares have slightly increased by 0.5%, and the KBW Bank Index has risen by close to 2%.
The actions of a major investor like Buffett can raise concerns, as noted by Macrae Sykes, a portfolio manager at Gabelli Funds, who also invests in Bank of America. Analysts suggest further reductions in Buffett's holdings could lead to additional pressure on the stock price.
Buffett has not disclosed the reasons for the sale, and Berkshire Hathaway has not commented on the matter. Bank of America will soon release its earnings report, alongside Citigroup, with investor focus on rising deposit costs and stagnant loan demand.
Morningstar’s financial services stock analyst Suryansh Sharma suggests a near-term rebound in Bank of America's stock price is unlikely, noting that after a substantial rise from 2023 lows, the stock is "not cheap."
Buffett initially invested in Bank of America during a period of widespread concern over the bank's capital needs following the financial crisis. Despite recent sales, Buffett’s investment has been fruitful, with Bank of America's stock multiplying nearly six times since his initial investment. Brian Moynihan, CEO of Bank of America, praised Buffett as a "great investor who stabilized our company."
In addition to reducing his stake in Bank of America, Buffett has also exited his position in Wells Fargo and halved his holdings in Apple earlier this year. This strategic adjustment might reflect Buffett's economic caution amid rising inflation and interest rates, as well as his belief in tax-efficient investing strategies, potentially influenced by changes in federal capital gains tax rates.
