Warren Buffett’s holding company Berkshire Hathaway (NYSE:BRK.B) has earned $10 billion from selling down its stake in Bank of America (BAC) stock over the past few months.
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Berkshire’s latest filings with the U.S. Securities and Exchange Commission (SEC) show that the diversified holding company run by Buffett has netted $10 billion since it started reducing its stake in Bank of America this July. In the past three months, Buffett has reduced his stake in the second largest U.S. lender to 10.1% from 13.1%.
Buffett first bought $5 billion worth of Bank of America stock in 2011 in the aftermath of the 2008-09 financial crisis. Until this year, Buffett had steadily increased his position in BAC stock to the point where he became the bank’s largest shareholder. Bank of America became the second largest position in Berkshire Hathaway’s massive $311 billion investment portfolio behind Apple (AAPL).
Buffett’s Mysterious Stock Sales
The reasons why Buffett has been selling BAC stock remain a mystery. Buffett himself has refused to comment. Some analysts say that Buffett has lost confidence in Bank of America. Others say Buffett is anticipating a market downturn in coming months. Still others say Buffett is simply taking profits on a big gain he has in BAC stock.
To be sure, Buffett has earned a tidy profit on his Bank of America investment. Berkshire Hathaway purchased the stock at an average price of $14 a share and it is currently trading at $40.06 per share, meaning that Buffet has a gain of 185% on his holding of BAC stock.
Bank of America stock hit a 52-week high of $44.44 in July of this year after reporting second-quarter financial results, which was shortly before Buffett started selling the stock. Berkshire Hathaway currently owns 784.55 million shares of BAC stock worth $31.46 billion.
Is Bank of America Stock a Buy?
Bank of America stock has a consensus Moderate Buy rating among 18 Wall Street analysts. That rating is based on 12 Buy and six Hold recommendations issued in the last three months. There are no Sell ratings on the stock. The average BAC price target of $45.89 implies 14.51% upside potential from where the shares currently trade.
