Warren Buffett, the 94-year-old CEO of Berkshire Hathaway, has once again adjusted his investment strategy concerning Bank of America (BofA). This week, Berkshire offloaded additional shares to maintain its stake below the critical 10% regulatory threshold. This strategic move was necessitated by BofA's aggressive share buyback program, which unintentionally increased Berkshire's ownership to over 10%. The regulatory implications of holding more than a 10% stake require more frequent and onerous reporting to the SEC, which Buffett aims to avoid.
Berkshire Hathaway’s selling spree led to total proceeds exceeding $370 million, beginning abruptly in mid-July. These actions have successfully brought Berkshire’s stake down to 9.88%, thus allowing less frequent reporting—quarterly rather than at every significant trade. As of Thursday, the entire position is valued at approximately $32.64 billion. Bloomberg clarified how BofA's announcement of purchasing $3.5 billion worth of its own shares during the third quarter necessitated this move. Previously, Buffett had reduced the holdings to below the 10% threshold, only to be inadvertently pushed above it due to these buybacks.
This recent divestiture marks the first substantial reduction of BofA shares by Berkshire since the onset of the COVID-19 pandemic. Despite these sales, Buffett continues to be the largest shareholder of Bank of America. Coincidentally, Bank of America reported its third-quarter earnings this Tuesday, unveiling a decline in net interest income, while charge-offs and credit losses surged to unprecedented levels. The bank's financials present a stark backdrop, possibly influencing Buffett's timing, although neither he nor Berkshire has issued official statements about their ongoing strategy regarding BofA.
The sale of BofA shares could be interpreted in several ways. Some market analysts have speculated on the motives behind this significant unloading, particularly in light of the current provisions for credit losses, which have reached their highest point since the early days of the COVID-19 pandemic lockdowns. The financial community continues to watch closely for any further actions or statements from Buffett that might shed light on his long-term plans for this substantial investment.