Warren Buffett Trims Bank Of America Stake, Analysts Speculate Why

Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) continues its steady sale of Bank of America (NYSE: BAC) shares.

What Happened: The firm offloaded 18.7 million shares between Sept. 3 and Sept. 5. It raised $760 million in the process.

Following this sale, Berkshire's total divestment from the bank has reached nearly $7 billion since the selling started in mid-July.

Yet, Berkshire Hathaway remains the bank's largest shareholder, still holding approximately 864 million shares. This gives it a stake of 11.1% - a reduction of around 5% from its peak.

If the firm's stake falls below 10%, according to Section 16 of the Exchange Act, it wouldn't need to report further sales within two business days.

Why It Matters: Buffett has offered no public explanation for the sales. Analysts speculate that the decision might be driven by changing market conditions, such as the anticipated shift in monetary policy that FED's Chairman Jerome Powell signaled at a recent Jackson Hole symposium.

It is also worth noting that the widely used "Buffett indicator," which compares the U.S. GDP to total stock market capitalization, has climbed two standard deviations above its historical average-a typical sign that stocks are richly valued.

Meanwhile, Berkshire hit an all-time high, with its stock price reaching $484.82 intraday on Wednesday before correcting to close at $464.92 on Thursday. By reaching over $1 trillion in market capitalization, the firm became the first non-tech company to enter such an exclusive club. The stock is up 28.68% year-to-date.

Buffett's initial interest in Bank of America began in August of 2011 when Berkshire invested $5 billion in preferred stock and warrants that guaranteed a 6% annual dividend. That investment alone was enough catalyst to push the stock 25% higher, signaling a turnaround. Still, it took more than a decade to reach the levels where it traded before the Great Recession.

Price Action: In 2024, Bank of America mirrored the broader market movement. Since reaching a high of $44.13 in July, the stock has dropped around 9.2%, coinciding with Berkshire's ongoing sell-off.