Berkshire Hathaway Sells $6 Billion in Bank of America Shares Amid Stock Surge

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Berkshire Hathaway, the investment conglomerate led by Warren Buffett, has offloaded more than $6 billion worth of shares in Bank of America (BofA), following a significant rally in the bank’s stock. This move comes as analysts suggest that profit-taking could be the primary reason for the sales. According to a disclosure made by Berkshire late on Friday, the firm sold approximately 21.1 million shares of BofA between August 28 and August 30.

This latest round of sales is part of a broader series of transactions, as Berkshire has been gradually reducing its stake in the second-largest U.S. bank since mid-July. In total, the company has sold around 150.1 million shares over several rounds, collectively earning about $6.2 billion, based on data from LSEG (London Stock Exchange Group).

Analysts believe the sales reflect an effort by Buffett and his team to capitalize on the stock’s recent strong performance. BofA’s stock price has risen more than 50% since late October, which has given Berkshire an opportunity to take profits after acquiring shares at much lower prices.

“The recent sales by Berkshire Hathaway are likely a case of simple profit-taking after the stock experienced significant gains. Berkshire took advantage of the lower share prices when the market was less favorable,” said Christopher Marinac, director of research at Janney Montgomery Scott.

Despite the gains in BofA’s stock price, the sale of such a large volume of shares has placed some pressure on the bank’s stock, which has underperformed relative to the broader market since Berkshire began selling its stake. However, it is important to note that Berkshire remains the largest single shareholder of Bank of America, even after these sales. As of the close of trading on Friday, Berkshire still owned 882.7 million BofA shares, valued at nearly $36 billion.

Neither Bank of America nor Berkshire Hathaway responded to requests for comment from Reuters regarding the sales.

Warren Buffett’s connection with Bank of America dates back to 2011 when Berkshire Hathaway made its initial investment in the bank by purchasing $5 billion in preferred stock. Since then, Buffett has been a strong supporter of BofA, gradually increasing his firm’s stake over the years.

However, there may be strategic reasons for the recent sell-off. According to Matt O’Connor, an analyst at Deutsche Bank, Berkshire might be reducing its stake to remain below a key regulatory threshold. “We don’t know exactly how much more Buffett plans to sell, but it’s possible he’s aiming to reduce Berkshire’s ownership just below the 10% mark to avoid additional regulatory scrutiny,” O’Connor said.

Currently, Berkshire’s stake in BofA stands at around 11.4%. If the holdings drop below 10%, the company would face fewer reporting requirements and less regulatory oversight regarding its investments in the bank.

Another factor contributing to the decision to trim the stake in Bank of America could be related to Berkshire’s portfolio allocation strategy. Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors, suggested that Berkshire may be rebalancing its holdings to maintain a proportional balance with its other major investments, particularly Apple. “It’s possible that Buffett and Berkshire have reduced their stake in Bank of America to adjust its size relative to their large Apple position, which they recently halved,” Schulman explained.

While Buffett is not typically known for frequently selling stocks to realize profits, there are instances where the billionaire investor seizes the opportunity to capitalize on a strong upward movement in a particular stock. The BofA stock rally appears to have provided such an opportunity.

Looking forward, the investment community will be closely watching for any further reductions in Berkshire’s stake in Bank of America. As long as the ownership remains above the 10% threshold, Berkshire is required to report its sales. However, once it falls below that level, Berkshire will have more flexibility regarding its trading activity in the bank’s stock.

In the meantime, despite the ongoing sales, Berkshire Hathaway continues to maintain a dominant position in Bank of America, underscoring Buffett’s long-term confidence in the U.S. banking sector.