Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) has continued to decrease its holdings in Bank of America (BAC). Over the three trading days ending Tuesday, Berkshire sold an additional $863 million of BAC stock, reducing its stake to 10.5%.
This latest move follows a series of sell transactions that began in mid-July. While Berkshire still holds a significant portion of Bank of America valued at $32.1 billion based on Tuesday’s closing price, the gradual divestment suggests a strategic shift in Buffett’s investment strategy.
Potential Reasons for Berkshire Selling BAC Stock
Berkshire’s extensive sale of Bank of America stock may prompt investors to wonder about the underlying reasons for this action. Some of the factors that could influence these sell transactions could be:
- Avoiding SEC Filing Requirement: As a major shareholder, Berkshire is required to file with the SEC within two business days of any changes to its stake in Bank of America. By continuing to sell, Berkshire is getting closer to the point where it can reduce its ownership below 10%, thereby avoiding this filing requirement.
- Market Conditions: Changes in the banking sector or broader market conditions might be prompting Buffett to reevaluate his investment.
- Diversification: Berkshire may be seeking to diversify its portfolio by reducing its exposure to the financial sector.
Despite the recent reductions, Berkshire remains the largest shareholder of Bank of America. While Berkshire’s continued selling pressure has contributed to a decline in Bank of America’s stock price since mid-July, the overall impact on the bank’s prospects is likely to be limited.
Is BAC a Good Buy Right Now?
Turning to Wall Street, BAC has a Moderate Buy consensus rating based on 12 Buys and six Holds assigned in the last three months. At $45.41, the average Bank of America price target implies 15.11% upside potential. Shares of the company have gained about 19.5% year-to-date.
