In a notable shift in investment strategy, Warren Buffett’s Berkshire Hathaway has decreased its shareholding in Bank of America (BofA) to below 10%. This decision, unveiled in a recent filing with the U.S. Securities and Exchange Commission (SEC), follows a wave of share sales that commenced in mid-July. Specifically, Buffett’s firm sold over 9.5 million shares through a sequence of three transactions that occurred between Tuesday and Thursday. This action reduces Berkshire’s total stake to approximately 775 million shares, equating to just under 10%.
The reduction in shareholding has significant regulatory implications. By falling below the 10% mark, Berkshire Hathaway is no longer obligated to promptly disclose its trading activities in BofA’s shares. Under SEC guidelines, shareholders owning more than 10% of a company must report transactions involving that equity within two business days. This change allows Buffett more flexibility in managing his investments without the same level of scrutiny.
Despite this latest decrease, Berkshire remains the largest institutional investor in Bank of America. Interestingly, the bank’s stock price experienced a slight uptick, around 1%, over the month following Buffett’s selling activity. BofA’s CEO, Brian Moynihan, has pointed to the market’s absorption of the stock and the positive effects of the bank’s own stock buyback program as key factors mitigating any negative impact from Berkshire’s sell-off.
Buffett’s relationship with Bank of America dates back to 2011 when he notably invested $5 billion in preferred stock and warrants to bolster confidence during the subprime mortgage crisis. His decision to convert those warrants into common stock in 2017 solidified Berkshire’s position as the bank’s largest shareholder, a title that was later reinforced by additional investments in 2018 and 2019. However, recent developments indicate a cautious approach from Buffett towards the banking sector.
The recent sales are part of a broader trend of Buffett divesting from longstanding holdings within the banking sector, including notable institutions like JPMorgan Chase, Goldman Sachs, Wells Fargo, and U.S. Bancorp. This pattern emerged in the wake of Buffett’s expressed concerns regarding the banking industry’s stability, particularly after instances of bank failures in both 2008 and 2023. His remarks reflect a growing apprehension about the resilience of deposits and the overall health of the banking sector in an increasingly digital and volatile economic environment.
Warren Buffett’s strategic sell-off of Bank of America shares signals a notable transition in his investment approach, characterized by a cautious outlook on the banking sector. The digital age and instability in banking confidence have shifted the dynamics, compelling even seasoned investors like Buffett to reassess their stakes. As the financial landscape continues to evolve, all eyes will be on Berkshire Hathaway’s next moves, with the anticipation of their next 13F filing providing a clearer picture of Buffett’s future investment strategies.