Today’s News
Berkshire Hathaway, led by Warren Buffett, has sold off a significant portion of its stake in Bank of America (BofA), generating over USD 10 billion since it began selling shares in July, according to a filing released on Monday.
Buffett, who started investing in BofA in 2011, saw his stake reduced from 13.1% to 10.1%.
Image Source: Shutterstock
The large-scale selloff has unsettled other BofA shareholders, particularly given ongoing uncertainty surrounding the banking sector amid fears of a potential U.S. recession. Since Berkshire’s first sale in July, BofA shares have dropped nearly 7%, while JPMorgan Chase, the largest U.S. bank, has gained 0.5%, and the KBW Bank index has risen nearly 2%.
“When one of America’s foremost investors is selling, that creates apprehension,” said Macrae Sykes, portfolio manager at Gabelli Funds, which has invested in BofA. Analysts have cautioned that if Buffett continues to reduce his stake, it could put additional pressure on the stock. Although Buffett has never actively managed the bank, his large holdings classify him as an insider under U.S. regulations.
While Buffett has not provided a reason for selling, his move has sparked speculation about his outlook on the U.S. economy and the stock market. Some investors see the sales as reflecting his concerns about inflation and high interest rates, while others believe it indicates a lack of confidence in the stock market, which Buffett has criticized for “casino-like behavior.”
Bank of America, which reports its third-quarter results next week alongside Citigroup, faces challenges such as rising deposit costs and sluggish loan demand. Analysts like Morningstar’s Suryansh Sharma are skeptical about a near-term recovery for BofA stock, noting that the stock is “not cheap” after having gained nearly 50% from its 2023 lows.
Buffett’s history with BofA dates back to 2011, when he invested in the bank during a time of widespread concern about its capital needs after the financial crisis. Since then, BofA shares have risen nearly sixfold. CEO Brian Moynihan has praised Buffett, calling him a “great investor” who helped stabilize the company.
Image Source: Reuters
Image Source: Reuters
In recent years, Buffett has also reduced his stake in Wells Fargo, a holding he had since 1989, and halved his position in Apple earlier this year. At Berkshire’s annual meeting in May, Buffett mentioned that selling made sense, given potential changes to the federal tax rate on capital gains depending on the outcome of the U.S. election.
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