Buffett's latest move: reducing his holdings in his beloved Bank of America

After Bank of America released better-than-expected Q2 financial report, Buffett took action to reduce his holdings in this bank that he loves the most, which is considered an important adjustment for the "Stock God" investor portfolio.

According to a public document released on Friday, between July 17th and 19th, Buffett's Berkshire Hathaway completed several transactions, selling approximately 34 million shares of Bank of America worth about $1.48 billion in total, with transaction prices ranging from $43.13 to $44.07 per share.

After this reduction, Berkshire Hathaway still holds about 999 million shares of Bank of America, worth over $42 billion, remaining one of the largest shareholders of the bank. These shares are held by various subsidiaries of Berkshire Hathaway, covering a range of sectors from insurance companies to financial institutions, without double counting in the complex ownership structure of the group.

Reduction occurred right after Bank of America's financial report

Buffett's reduction took place one day after Bank of America announced its Q2 financial report. On Tuesday, Bank of America disclosed its second-quarter financial report, with both revenue and profit exceeding analysts' expectations.

Due to the strong performance in the second quarter, Bank of America's stock price target underwent a series of adjustments. Phillip Securities downgraded the stock rating from buy to neutral, but raised its 2024 earnings forecast by 8%, citing increased net interest income and rising fee income from wealth management and investment banking services. BMO Capital Markets also raised its long-term expectations by 2%, due to higher-than-expected non-interest income and expected increase in stock buybacks.

Meanwhile, Evercore ISI raised the target stock price of Bank of America due to investors' optimistic outlook on the bank's net interest income expansion prospects for 2025.

However, the second-quarter financial report showed that net interest income, one of the bank's largest sources of revenue, fell to $13.7 billion, below analysts' expected $13.8 billion.

Bank of America's market value reached $335.49 billion. Some analysts believe that despite Berkshire Hathaway recently reducing its holdings, Bank of America's performance remains strong in certain areas.

In the past 12 months, the company's dividend has grown by 9.09%. Bank of America has not only maintained dividends for 54 consecutive years but also increased dividends, demonstrating its financial stability and shareholder-friendly policies.

In the past month, Bank of America's stock price has risen by 7.9%, accumulating a 26.55% increase year-to-date.

Buffett and Bank of America's Relationship

As Berkshire's second-largest holding, Bank of America is also one of Berkshire's most profitable companies. Buffett's investment in Bank of America began after the 2011 financial crisis when he invested $5 billion in Bank of America's preferred stock and obtained the right to purchase common stock. The dividend yield of these preferred stocks was 6%, generating an annual income of $300 million Some analysts believe that this investment not only injected confidence into Bank of America, but also created huge unrealized profits, causing the bank's stock price to soar quickly.

However, these preferred shares also come with warrants that allow the purchase of 700 million shares of Bank of America common stock at a price of $7.14 per share.

In 2017, Buffett eventually exercised the above rights and made additional stock purchases, increasing his stake in Bank of America by purchasing shares at a price far below the market price of $7.14 per share, making it one of Berkshire Hathaway's largest holdings. Since the initial investment, Buffett has increased his holdings by more than 300 million shares.

In 2023, due to concerns in the market about several high-profile bank failures, Buffett and his team sold shares of several different bank stocks, but he never sold any of his Bank of America shares. At the Berkshire Hathaway shareholders meeting that year, Buffett reiterated his strong liking for the bank's management