Warren Buffett’s Berkshire Hathaway has trimmed its stake in Bank of America by another 9.5 million shares, worth around $382 million, dropping his company’s holdings in the bank to less than 10 percent, a key reporting threshold.
The latest selloff brings Berkshire’s stake in Bank of America to 775 million shares, worth roughly $31 billion and representing a 9.99 percent stake in America’s second-biggest bank. By falling below the 10 percent threshold that mandates immediate SEC disclosure, Berkshire is now able to report any future sales in its quarterly filings instead of promptly after each transaction.
Neither Buffett nor Berkshire have said what’s behind the selloff, which began roughly three months ago. When the Omaha-based company sold nearly $230 million worth of Bank of America shares in September, the bank’s chief expressed surprise.
When asked about Buffett’s sell-off of the bank’s shares at a Barclays event on Sept. 10, Bank of America CEO Brian Moynihan said he wasn’t sure what was motivating the billionaire investor, adding that the Berkshire founder has “been a great investor for our company” and had “stabilized our company when we needed it.”
Some analysts speculated in September that the move was about making a profit when stock prices were high, rather than due to economic fears.
“The Berkshire BofA sale is just profit taking after being opportunistic when the stock was much cheaper,” said Christopher Marinac, director of research at Janney Montgomery Scott.
“We don’t know how much further he [Buffett] could sell down shares (if any), but we assume it’s possible he aims to be just below the 10% reporting threshold to avoid regulatory scrutiny,” Deutsche Bank analyst Matt O'Connor wrote in a note at the time.
Despite cashing in a significant portion of his Apple shares, Buffett said at Berkshire’s May 4 annual meeting that he remains a fan of the iPhone maker and that he expects Apple to remain Berkshire’s largest stock investment. While answering questions at the annual meeting, Buffett suggested that the stock sale was for tax reasons as there was a risk that the federal capital gains tax rate could increase, depending on who wins the presidential election in November.
The 94-year-old Buffett, considered one of the world’s most renowned investors, started investing in Bank of America in 2011 when Berkshire purchased $5 billion of preferred stock in the lender.
The latest sell-off comes as U.S. stocks are on a bull run, with the Dow Jones and the S&P 500 closing the session on Oct. 11 at record highs as expectation-topping big bank earnings lifted investor sentiment.
JPMorgan Chase’s third-quarter sales and profits exceeded Wall Street estimates as the company generated more interest income than predicted.
“Broadly, I would say these earnings are consistent with the soft-landing narrative,” the bank’s CFO Jeremy Barnum told reporters on Oct. 11, connecting the bank’s financial results with investor speculation that the U.S. economy could avoid a recession after two years of high interest rates that have been a headwind for economic activity, denting demand and cooling the labor market.
Barnum added that investor optimism is “pretty consistent with this kind of Goldilocks economic situation,” referring to a kind of sweet spot where the economy expands but not so much that inflation rises too much.
Similarly, Wells Fargo profits and revenues both exceeded analysts’ expectations, with CEO Charles Scharf saying in a statement that the bank had diversified its sources of revenue, helping offset headwinds from net interest income.
