Bank of America still ranks among the major equity holdings of Berkshire Hathaway, yet Warren Buffett’s recent annual report featured an unexpected omission that raised eyebrows, especially among bank analysts. Jason Goldberg from Barclays took note of the peculiar absence in Berkshire’s latest 10-K, released last Saturday. Buffett, often hailed as the “Oracle of Omaha,” mentioned, “We own a small percentage of a dozen or so very large and highly profitable businesses with household names such as Apple, American Express, Coca-Cola, and Moody’s.” Surprisingly, Bank of America was not part of this list, which Goldberg found puzzling considering the bank’s significant presence and history, dating back to its founding in San Francisco in 1904. “If BAC was still in his top five, one might expect a mention,” Goldberg commented in his analysis. “With its 69 million U.S. consumer and small business clients, along with 3,700 financial centers and 15,000 ATMs across the country, it’s hard to argue that Bank of America isn’t a household name, arguably even more than Moody’s.”
This curiosity followed Berkshire’s move to reduce its holdings in Bank of America to about 680 million shares from approximately 1 billion in the second quarter of 2024. These sales contributed to a decline in the bank’s stock value, even as it reported earnings that exceeded expectations, largely due to stronger-than-anticipated results in investment banking and interest income. Now, the conglomerate’s shares have dipped below the significant threshold of 700 million, a volume initially acquired through low-priced warrants over a decade prior.
Buffett first began accumulating his substantial stake in Bank of America in a two-phase approach. His memorable investment in 2011 involved a $5 billion purchase of preferred stock and warrants to help restore confidence in the bank following the Global Financial Crisis. He converted these warrants into common stock in 2017. After getting approval from the Federal Reserve to increase the stake beyond 10%, Buffett acquired an additional 300 million shares from the open market during 2018 and 2019. The initial 700 million shares had a cost basis of roughly $7 each, while the subsequent 300 million shares averaged in the $30 range, as previously estimated by Goldberg. It was once believed that Berkshire would halt selling once reaching 700 million shares to avoid tax issues, yet this assumption didn’t hold true.
