Warren Buffet, CEO of Berkshire Hathaway, has sold off over $2 billion worth of Bank of America Stock over the last two weeks. The SEC filing reports revealed that Berkshire Hathaway dropped tends of million millions of common stock shares in America’s second largest bank.
Despite the massive divestment, Buffet didn’t completely drop Bank of America — or even a sizable portion of it. He still owns more than 980,000,000 shares at the time of this writing.
Still, many investors and Wall Street professionals are left speculating what Buffet saw in Bank of America’s trajectory that led the “Oracle of Omaha” to lessen his exposure to the bank’s performance.
Berkshire has been slowly unloading shares since July 17. Since then, the price per share dropped from approximately just shy of $44 to $41 as of July 29.
On Reddit’s r/WallStreetBets, users were quick to speculate on Buffet’s motivation to sell such a massive number of shares. Investor u/guddagudda777 pointed out that Buffet recently built a position in fossil fuel producer Occidental Petroleum Corp (ticker: OXY).
Others suggested that the Oracle of Omaha may have sold the shares in order to fundraise for a new investment—a common practice for investments firms with their sites set on a particularly promising company. Another user agreed, noting that the energy sector has plenty of affordable stocks with great potential.
Others aren’t so sure that it’s just a bid for more investment money. One user explained, “So many banks right now are just YOLOed in unsustainable growth. TBBK on the daily timeframe. With a cracked out RSI. And that’s not the only bank. I think they’re going to undergo self correction and retrace.”
In recent years, discussions about banking fees, predatory lending, and seemingly endless bailouts have become the norm among Americans. Some believe that banks are reaching a breaking point regarding regulations, profiteering, and similar issues. Others simply see the banking industry as a booming business that remain “too big to fail.”
It’s worth noting that Buffet is not afraid to walk away from a business entirely if he believes it’s not viable. Earlier this year, Berkshire Hathaway sold off all of its Globe Life stocks—washing their hands of the legally-beleaguered company. While the company is still struggling, its stocks increased in value since Berkshire Hathaway eliminated its investment.
But as of now, there’s little reason to think that Berkshire is walking away from Bank of America all together. Buffett’s $2.3 billion Bank of America sell off only represents approximately 12.5% of his firm’s total holdings. Still, it’s a significant portfolio shift for the storied investor who is know for long-term plays and calculated decisions.
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Buffet’s Investment Playbook
Buffet is famously open about his investing method. His famous method involves long-term investments, with his ideal investing time being “forever.” He also urges investors to “pick businesses, not stocks.”
In other words, Buffet is famous for being very careful about each company’s reputation, work styles, and profit model. He has a reputation for being level-headed — even in volatile times. Buffet is not one to panic sell.
As of right now, it’s not entirely certain what motivated Warren Buffet (or his company) to sell the stock. Berkshire Hathaway’s upcoming earnings call on August 3 may shed more light into the decision.
