Warren Buffett’s Berkshire Hathaway has sold around $10 billion worth of Bank of America shares, reducing its stake by nearly a quarter.
This move follows his earlier decision to cut his Apple holding by 56%, surprising investors with two major divestments from what were his largest equity positions.
Berkshire offloaded 239 million Bank of America shares between mid-July and early October, trimming its ownership from 13.2% to 10.2%, according to Securities and Exchange Commission filings. The stock was sold at prices ranging from $39 to $44, generating significant proceeds while still leaving Berkshire with a substantial $31 billion holding in the bank.
The rationale behind Buffett’s decision remains unclear, as he has not yet commented on the sales. However, there are several plausible explanations. The famed investor might be taking profits after a strong run, as Bank of America shares have risen about 50% in the past year and hit a two-year high just before Buffett began selling.
Tax considerations could also be at play, as he cited potential capital-gains taxes as a reason for trimming his Apple stake earlier this year. Berkshire’s long-standing investments in both Apple and Bank of America have generated enormous returns—fivefold for Apple and threefold for Bank of America—and the recent sales may reflect an effort to realize some of those gains.
There is also speculation that Buffett may be building up cash reserves for a large acquisition. Known for his “elephant-sized” deals, Buffett could be positioning Berkshire for a major purchase. However, Berkshire is already flush with liquidity, holding a record $277 billion in liquid assets at the end of June after selling off more than $90 billion worth of stocks in the second quarter alone.
What to know
Buffett’s relationship with Bank of America dates back to 2011 when he initiated a $5 billion investment after a fateful call with CEO Brian Moynihan. The deal gave Berkshire preferred stock with a 6% dividend and warrants to buy 700 million common shares at a fixed price.
In 2017, Buffett exercised those warrants, acquiring over $20 billion worth of common shares at a cost of $5 billion, which he funded by redeeming his preferred shares. He later increased his stake in 2020, buying $2.1 billion worth of shares over 12 consecutive trading days when the stock was trading around $25.
Now, Buffett has sold nearly 25% of his stake at around $40 per share, realizing substantial gains on both his 2020 purchases and the warrants he exercised. Whether these sales signal a broader portfolio rebalancing or preparation for a major acquisition remains to be seen, as investors await Berkshire’s next moves.
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