Stock god Buffett has made another move.
Buffett's Berkshire Hathaway cashed out $896.1 million (approximately RMB 6.3 billion) from its stake in Bank of America. Between September 17th and September 19th, Berkshire Hathaway made three reductions in its holdings of Bank of America, selling a total of 22.22771 million shares.
Buffett continues to reduce his holdings of Bank of America stocks.
On August 30th local time, documents disclosed by the US Securities and Exchange Commission (SEC) showed that Berkshire Hathaway sold approximately 21 million shares of Bank of America stock, cashing out $848 million. After this reduction, Buffett's Berkshire Hathaway's shareholding in Bank of America's outstanding shares has dropped to 11.4%. According to relevant regulations, if the shareholding ratio exceeds 10%, the transaction needs to be disclosed within a few days; If the shareholding ratio does not exceed 10%, there is no need to disclose the trading situation as soon as possible. Usually, it may take several weeks to disclose in each quarterly report.
Berkshire Hathaway reduces holdings of Bank of America stock filing (SEC)
According to the Securities Times, in July, Berkshire Hathaway made a significant reduction in its holdings of Bank of America stocks. Throughout mid July, the company sold approximately $3.825 billion worth of Bank of America stock.
In August, Berkshire Hathaway's divestment activities continued. From August 15th to 19th, the company sold approximately $550 million worth of Bank of America stock. Subsequently, from August 23rd to 27th, approximately 981.9 million US dollars worth of stocks were sold.
In July and August, Berkshire Hathaway had a total cash flow of approximately $6.205 billion.
According to CCTV Finance, 94 year old Buffett began investing in Bank of America by purchasing preferred shares and warrants for $5 billion in 2011. His Berkshire Hathaway eventually became the largest shareholder of the bank and has maintained this position ever since.
CCTV Finance
Analysts believe that from the historical profit trend of bank stocks, the combination of high inflation and high interest rates is favorable for bank stocks. However, Buffett's decision to sell Bank of America shares at this time suggests that he does not endorse the inflation narrative, and the Fed's interest rate cut may be one of Buffett's logic for reducing his holdings in Bank of America.
According to media reports, there are also market speculations that one of the reasons why Buffett sold off Bank of America stocks may be due to the bank's overvaluation. Meanwhile, Buffett may also be preparing in advance for the Federal Reserve's monetary policy shift. However, Ji Junli, chief investment officer of BBAE, a new Internet securities firm in the United States, believes that although the interest rate cut means the coming of a downturn in bank shares, it will not be the main reason for Buffett to sell bank shares. In fact, Buffett has been selling bank stocks since 2018, but most of the time he has not given a clear reason. Ji Junli speculated that the reason for the sale was that Buffett and his investment managers were somewhat disappointed with the operation of Bank of America and saw potential regulatory risks.
After Buffett's Berkshire Hathaway continues to reduce its long-term holdings in Bank of America, WSJ analysts believe investors can consider taking the opportunity to buy.
When the Federal Reserve cuts interest rates, it will weaken the interest income of many banks. Once interest rates are cut, the interest income generated by loans priced at benchmark rates for banks will begin to decrease.
According to Bank of America's previous forecast, if the Federal Reserve cuts interest rates three times by 25 basis points each before the end of the year, Bank of America expects its net interest income in the fourth quarter to decrease by approximately $225 million compared to the second quarter. However, WSJ analysts believe that there are some factors that can help Bank of America offset this adverse impact. Since last year, in the eyes of some investors, a large bond investment portfolio has been a pain point for Bank of America, but in the future, with interest rate cuts, this pain point will become a potential relative advantage.
At that time, not only may these low yield old bonds appreciate, but the large amount of securities maturing every quarter will continue to provide a significant boost to next year's net interest income, as those funds will be redeployed at current yields after maturity. According to Bank of America's forecast, the above factors, combined with the continued maturity of fixed rate loans such as car loans and home mortgages, will increase the bank's net interest income by approximately $300 million in the fourth quarter compared to the second quarter, thereby offsetting the negative impact of interest rate cuts.
In addition, net interest income also faces several favorable factors that are poised to take off. Bank of America has stated in a report that the maturity of cash flow swap hedging designed to prevent interest rate declines may result in an increase in net interest income starting in the second half of next year.
According to analysts' expectations compiled by Visible Alpha, they expect Bank of America's net interest income to grow by at least 5% by 2025. In contrast, it is expected that the net interest income growth of large banks such as Citigroup, JPMorgan Chase, and Wells Fargo will be much smaller, and may even decline. Many analysts believe that compared to peers such as Citigroup and JPMorgan, Bank of America's investment banking revenue currently contributes relatively more to its total revenue. Therefore, if the expected interest rate cut helps stimulate more corporate activity, then Bank of America will be the biggest beneficiary.
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