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Cailianshe News, July 21 (Editor: Shi Zhengcheng)After the U.S. stock market closed this week, Berkshire Hathaway submitted a reduction statement to the U.S. SEC, disclosing that it had reduced its holdings of Bank of America by nearly $1.5 billion in the past week. This is also the first time Buffett has reduced his holdings in this long-term "favorite stock" since the third quarter of 2020.

According to the announcement,Berkshire sold 33.89 million shares of Bank of America in four batches between Wednesday and Friday, at prices ranging from US$43.12 to US$44.06, with a total sales amount of approximately US$1.476 billion.

After completing this transaction, BerkshirePositionsIt still owns 998.9 million shares of Bank of America, worth more than $42.8 billion, and is still the second largest holding in Berkshire's investment portfolio after Apple.

Buffett's reduction in holdings coincided with the U.S. stock market's recent "rotational trading" style, with a large amount of profitable funds pouring out of technology giants.Adding positionsValue blue chips and small-cap stocks. Although Bank of America did not hit a record high like Goldman Sachs and JPMorgan Chase, its share price also rose to a nearly two-and-a-half-year high.Starting from October 2023, Bank of America's cumulative increase in this wave of growth has exceeded 75%.

(Bank of America daily chart, source: TradingView)

From "Standing on the Mountain" to "Wall Street Fable"

Similar to Buffett's investment in Apple, Berkshire's investment in Bank of America is also a classic "Wall Street value investment fable."

The stocks that Buffett sold this week can be traced back to 2011, when Berkshire invested $5 billion in Bank of America after the subprime mortgage crisis and received preferred shares that paid 6% interest annually. At the same time, they could be converted into 700 million common shares at a price of $7.14 per share for a period of 10 years.

At the time, Bank of America's stock price was in a state of continuous decline, and it once fell to $6 in the week when the deal was announced. After the announcement of the "Buffett deal", the stock price once rose to over $8, but then it continued to fall for nearly 4 months, and it bottomed out only after it fell below $5 at the end of 2011.

(Bank of America stock price, source: TradingView)

Buffett's real highlight came in the summer of 2017, when Berkshire announced that it would exercise its stock conversion rights that year.Since Bank of America's stock price had risen to $24 at the time, Buffett made a net profit of more than $12 billion just at the moment of exercising the option.The deal also made Berkshire the largest shareholder of Bank of America, a position it holds today.

As the title suggests, before the transaction that went down in investment history in 2011, Buffett had also "fallen" on the Bank of America stock.

According to historical statistics,The first time Berkshire bought Bank of America shares in history was in the second quarter of 2007. At that time when the wealth bubble was about to burst, Buffett bought 8.7 million shares of Bank of America at a price close to $50, and further increased his holdings in the third quarter.But as the market began to go south, Buffett first cut his investment in half in the third quarter of 2008.Position, and then held on until the fourth quarter of 2010, when he sold out all his positions at a price close to $10.

(Bank of America weekly chart, source: TradingView)

Therefore, Buffett's $5 billion bet in 2011 was also related to his previous experience of "standing guard at a high position". According to Buffett himself, he came up with the idea of ​​this investment "while taking a shower" and then found a way to ask someone to contact Moynihan, the CEO of Bank of America.

Moynihan later revealed that someone from Berkshire Hathaway called Bank of America’s customer service center and asked to “talk to the CEO.” Obviously, the customer service ignored the request. Later, Berkshire Hathaway’s financial director contacted Moynihan through a personal relationship on Wall Street.

Previously bought and sold many times

Unlike trading overseas stocks, Buffett often buys and sells when trading U.S. stocks, and does not "sell all the way to the bottom." Therefore, Buffett has "tapped" the stock of Bank of America many times.

According to trading data statistics, after making a fortune from exercising options in 2017,Buffett increased his holdings by nearly 270 million shares in four installments in 2018 and 2019, and then sold 45.6 million shares (including buying back 20 million shares) during the third and fourth quarters of 2019 when U.S. stocks plummeted.

After the severe blow of the COVID-19 pandemic to the U.S. stock market ended in early 2020,Buffett increased his holdings significantly in July 2020, buying more than 100 million shares in four batches.. Subsequently, Buffett sold another 22.8 million shares in the third quarter of 2020. As far as this transaction alone is concerned, it can be said that he sold it at the last moment before the stock price took off.

(Bank of America weekly chart, source: TradingView)

By the first quarter of 2023,Buffett bought back all 22.8 million shares he sold two and a half years ago at $22-26 at a price range of $26-36., which was also the last operation before this transaction this week.

(Shi Zhengcheng, Cailianshe)