Berkshire Hathaway trims Bank of America stake as Buffett continues selling spree

Berkshire Hathaway (NYSE: BRK.B) has sold nearly $1.5 billion worth of Bank of America shares as Warren Buffett continues his selling spree. The “Oracle or Omaha” has been a net seller of shares for six consecutive quarters as the value investor hasn’t been finding opportunities amid high valuations.

Notably, last year, Buffett exited banks like Wells Fargo, Goldman Sachs, and JPMorgan Chase. The conglomerate held nearly a 10% stake in Wells Fargo and was among its biggest shareholders. Historically, Buffett has tried to keep Berkshire’s stake in banks below 10% to avoid regulatory scrutiny.

Buffett trims stake in Bank of America

He however made an exception for Bank of America and took regulatory approval to hike the stake beyond 10%. Berkshire invested $5 billion in the company’s preferred shares in 2011 and gradually increased the stake. Buffett had also invested in Goldman Sachs during the 2008-2009 financial crisis even as he passed over struggling names like Lehman Brothers.

Bank of America eventually became Berkshire’s second-biggest holding behind Apple. Despite selling the shares, Berkshire remains the bank’s largest shareholder with over 12% of the stake.

Buffett sold Apple shares in Q1

Incidentally, Buffett has also been selling Berkshire’s gigantic stake in Apple. According to Buffett, the decision to sell Apple shares was based on tax considerations, especially on hopes that taxes might need to rise to fund the burgeoning US fiscal deficit.

“It doesn’t bother me in the least to write that check and I would really hope with all that America’s done for all of you, it shouldn’t bother you that we do it and if I’m doing it at 21% this year and we’re doing it a little higher percentage later on, I don’t think you’ll actually mind the fact that we sold a little Apple this year,” said Buffett at this year’s shareholder meeting.

For context, Buffett started investing in Apple way back in 2016 and gradually built the stake into the largest holding in Berkshire’s portfolio of publicly traded securities. The “Oracle or Omaha” as Buffett is popularly known as has kept adding to Apple shares until the third quarter of 2018.

Buffett Has Sold Apple Shares in the Past Also

He however, sold shares in the final quarter of 2018 which looked surprising as the stock crashed that quarter as then President Donald Trump stepped up the heat in his trade war with China leading to pressure on shares of companies that have a significant presence in the world’s second-largest economy.

Buffett continued to sell Apple shares in 2019 and 2020. In fact, Berkshire sold about $11 billion worth of Apple shares in the back half of 2020 which was no small sum even by Berkshire’s standards.

Berkshire’s cash pile has soared

Meanwhile, thanks to the Apple stake sale and strong operating income, Berkshire’s cash pile spared to a new record high of $188.99 billion, surpassing the previous record high of $167.6 billion at the end of 2023.

Buffett hasn’t been able to find attractive investment opportunities and said it is likely that the company’s cash pile might rise to above $200 billion by the end of the current quarter.

“Unless something dramatic happens that really changes capital allocation, we will have Apple as our largest investment. But I don’t mind at all under current conditions, building the cash position,” said Buffett at the shareholder meeting in May.

Berkshire has increased buybacks

Amid the lack of investing opportunities, Buffett has found solace in share repurchases. Previously, Berkshire used to repurchase shares only as long as they traded upto 120% of the book value. However, the company changed the policy to give Buffett more discretion in buybacks.

Between 2020 and 2021 Berkshire spent over $50 billion on share repurchases as Buffett capitalized on the fall in its share price. Since then, the company has gone relatively quiet and repurchased shares worth around $8 billion and $9 billion in 2022 and 2023 respectively.

In Q1, the company repurchased $2.6 billion worth of its shares.

Buffett bought a stake in Chubb

Buffett has always had a flair for banking and financial companies and in the past also the bulk of the conglomerate have been in either financials or consumer companies. Berkshire owns GEICO Insurance and Buffett uses the company’s massive float to invest in other companies.

Berkshire revealed that it owned 26 million shares in insurer Chubb. The conglomerate had been building a stake in this “mystery stock” in the previous quarter and the stake was valued at $6.7 billion at the end of March which made it the company’s ninth biggest holding.

Berkshire occasionally invests in overseas companies

Berkshire has invested in overseas companies also, including in Chinese electric vehicle giant BYD which Charlie Munger had termed his best investment. The conglomerate also invested in Indian fintech company Paytm and Buffett has been buying stakes in Japanese trading houses. However, Berkshire has exited Paytm at a loss while it has been gradually trimming its stake in BYD amid the price war in the electric vehicle industry.

Coming back to the sale of Bank of America shares, it could be likely that Buffet is selling shares for tax reasons – as was the case with Apple. We’ll get more updates on Buffett’s buying and selling activity when Berkshire releases its Q2 13F next week.