Some analysts believe that Buffett's shareholding reduction in Bank of America may be related to concerns about valuation. The current price of Bank of America has been getting closer to the level before the plunge of the US stock market in early 2022. In addition, tax rates may also be a possible reason. Regardless of the reason, based on Buffett's style, once the shareholding reduction starts, it will last for a considerable period of time.
Buffett's $Berkshire Hathaway-A (BRK.A.US)$stocks were sold more this week $Bank of America (BAC.US)$and the shareholding in the bank has been reduced in six consecutive trading days.
The latest regulatory filings show that Berkshire Hathaway sold a total of 18.9 million shares of Bank of America stock this week, with a trading amount of 0.8025 billion US dollars and an average selling price of 42.46 US dollars per share, on Monday, Tuesday, and Wednesday. Over the past six trading days, Berkshire Hathaway has sold a total of 52.8 million shares of Bank of America stock worth 2.3 billion US dollars.
After news of Buffett's latest selling, Bank of America's stock fell 1.2% on Thursday, a larger decline than the 0.5% fall in the S&P 500 index.
Bank of America is Berkshire Hathaway's second largest holding. Currently, Berkshire Hathaway still holds 980.1 million shares of Bank of America, with a total market value of approximately 41.3 billion US dollars, far lower than its largest holding, Apple's market value of 172.5 billion US dollars.
When Berkshire Hathaway's shareholding in any company exceeds 10%, it must disclose its stock trading within two working days after the transaction. After the latest sale, Berkshire Hathaway's shareholding in Bank of America dropped to 12.5%, still higher than the disclosure level required by the regulatory requirement of 10%.
This is the first time Berkshire Hathaway has sold Bank of America shares since the fourth quarter of 2019. In 2022, Berkshire Hathaway exited several long-term bank holdings, including JPMorgan Chase, Goldman Sachs, Wells Fargo & Co, and U.S. Bancorp, but not Bank of America.
Buffett's cut this year came after Bank of America announced its Q2 earnings one day before. Last week, Bank of America released its second-quarter earnings, which exceeded analysts' expectations for revenue and profits.
In fact, just last year, Buffett highly praised Bank of America's leadership, saying: "Years ago, I voluntarily joined, and they did a very good deal for us. I really like Brian Moynihan, I don't want to sell it."
Some analysts believe that Buffett's reduction in Bank of America holdings may be related to concerns about valuation. Bank of America's stock performance has outperformed the US stock market so far this year. As of Thursday intra-day, Bank of America's stock price has risen by about 26% during the year, while the S&P 500 index has risen by about 15%. Currently, Bank of America's price is getting closer and closer to the level before the US stock market fell sharply in early 2022. When Bank of America's stock price hit its lowest point last year, it was cut almost in half from the high point in 2022.
In addition, some analysts believe that locking in holding profits through preferential tax rates may also be a reason for holding Bank of America shares. This was the reason why Berkshire Hathaway sold some of its Apple holdings.
Regardless of the reason, according to Buffett's style, once the selling starts, it will last for quite some time.
According to Berkshire Hathaway's financial report released in early May this year, in the first quarter, Berkshire Hathaway sold nearly $20 billion of its holdings in other listed companies' stocks, and only purchased $2.7 billion at the same period. By the end of the first quarter, Berkshire Hathaway's cash reserves further increased to $189 billion, breaking the historic high set in the fourth quarter of last year. Overall, Buffett has been a net seller in the stock market in recent quarters, with the portfolio's stock value sold in 2023 amounting to $24.2 billion.
Editor/Somer