Berkshire Hathaway chairman Warren Buffett bought $340m of Bank of America shares in five days between 31 July and 4 August, adding to purchases he made last month.
The billionaire investor bought $813m of Bank of America shares in the third week of July. Berkshire Hathaway now holds almost 11.9% in the Main Street bank making it the largest shareholder. Vanguard Group is the second-largest shareholder with a 7.3% stake.
Warren Buffett and Bank of America
Buffett has previously tried to keep his holdings in banks below 10%, as holdings in banks above this mark attract regulatory scrutiny from the Federal Reserve. Between 2018 and 2019, Berkshire Hathaway sold Wells Fargo shares to keep its stake below 10%.
However, last year, Buffett applied for permission with the Federal Reserve to purchase more Bank of America shares. Generally, asset managers disclose changes to their holdings in their quarterly 13F. However, since Berkshire Hathaway holds more than 10% in Bank of America, it has to disclose the transactions before the 13F.
The world’s most famous investor has a flair for banking and financial stocks and five of Berkshire Hathaway’s top 10 holdings are in this sector. Bank of America is now Berkshire Hathaway’s second-biggest holding, behind Apple.
“I feel very good about the banks we own,” Buffett told CNBC in February . “ They’re very attractive compared to most other securities I see.” However, in the first quarter, Berkshire Hathaway trimmed its stake in JP Morgan Chase whose shares it had been buying since 2018.
Banking stocks have been under pressure this year. Bank of America shares are down almost 27% this year. Wells Fargo, another bank stock in Berkshire Hathaway’s portfolio is down 55% for the year and is among the top 20 losers in the S&P 500 this year.
Are Berkshire Hathaway shares a buy?
Berkshire Hathaway stock has also underperformed the markets over the last couple of years. After underperforming the S&P 500 by over 20% in 2019, Berkshire Hathaway’s returns are trailing the S&P 500 by a similar quantum this year also.
However, Berkshire Hathaway stock looks a good long term buy. Warren Buffett is understood to have repurchased $5bn of shares last month. Warren Buffett repurchases Berkshire Hathaway shares when he finds shares undervalued.
Value stockpickers such as Berkshire Hathaway have, in general, underperformed the markets this year. It is tech and growth stocks like Amazon, Apple, and Tesla that have catapulted the Nasdaq to record highs.
However, value investment strategy might stage a comeback as growth stocks’ valuations have started to look expensive. With a cash holding of $137bn at the end of the first quarter, the Oracle of Omaha, as Buffett is known, has a lot of dry powder to make more attractive deals. Warren Buffett ended his deal drought and acquired Dominion Energy’s natural gas assets for $10bn in July.