Warren Buffett, the CEO of Berkshire Hathaway, has sold $10.5 billion worth of Bank of America stock. At the same time, he has spent nearly $78 billion on shares of his own company. Over the past eight quarters, Berkshire Hathaway sold $166 billion more in stocks than it bought.
The company held a stake of more than 10% in Bank of America. It has filed 16 Form 4s with the SEC since mid-July. These forms show the sale of over 266 million shares, worth $10.52 billion.
Buffett’s comments at Berkshire’s annual meeting in May suggest a possible reason for the sale. He may have wanted to lock in gains before an expected rise in the corporate tax rate. This could save the company money in the long run.
The sale of Bank of America stock might also reflect broader concerns. Bank of America is very sensitive to changes in interest rates. With the Federal Reserve starting to lower rates, BofA’s results could suffer more than other banks.
The current market valuation also seems high to Buffett.
Buffett’s strategic stock maneuver
The Shiller P/E ratio of the S&P 500 was over 37 at the end of October.
This is more than double its historical average. It suggests the stock market may be overvalued. Despite selling other stocks, Buffett has shown strong confidence in Berkshire Hathaway.
Since mid-2018, he has bought back nearly $78 billion worth of Berkshire shares. This began after a change in July 2018 that allowed buybacks under certain conditions. In the most recent quarter ending in June, Buffett bought back $345 million worth of Berkshire’s stock.
This ongoing buyback shows Buffett’s belief in the value and growth potential of his company. It offers a way to boost shareholder value by reducing the number of shares and increasing each investor’s ownership stake. The large sales in stocks like Bank of America could suggest caution in an overvalued market.
However, Buffett’s big investment in Berkshire Hathaway shares highlights a confident long-term strategy. It focuses on the company’s intrinsic value and shareholder growth. As Buffett navigates market changes, his approach remains based on fundamental value investing principles.
He carefully balances risk and opportunity.
