Berkshire Hathaway reduces Bank of America stake, but still holds 12%

From Nasdaq: 2024-08-26 10:38:00

Warren Buffet’s Berkshire Hathaway cuts stake in Bank of America, selling nearly 14 million shares across three trading sessions. Despite the reduction, Berkshire still holds a 12% stake in BAC, the third largest holding after Apple and American Express. Berkshire’s shares have outperformed the industry, financial sector, and S&P 500 this year.

The likelihood of a rate cut in September has increased, signaling potential economic shifts. Powell’s comments indicate a quarter percentage point cut possibility in September. The FedWatch predicts a one-in-three chance of a half-point reduction. Bank of America, a rate beneficiary, may see impacts on net interest income with lower rates.

Berkshire Hathaway trades above the 50-day moving average and near its 52-week range high, indicating a bullish trend. With over 90 subsidiaries, Berkshire diversifies its earnings streams. The conglomerate’s efficient capital utilization, acquisitions of valuable companies, and disciplined investments with a focus on undervalued assets reflect Buffet’s investment acumen.

Berkshire’s stock may be overvalued compared to the industry, trading at a higher price-to-book multiple. Despite lagging ROE and ROIC compared to industry averages, Berkshire continues to make improvements. Two out of three analysts covering the stock have raised estimates for 2024 and 2025, showing optimistic sentiment for future growth potential.

Investing in Berkshire Hathaway offers dynamism and stability to portfolios, led by Warren Buffet’s proven track record. Shareholders should continue to hold the stock, benefiting from Buffet’s strategic investments. However, new investors may want to wait for a better entry point due to the current premium valuation. The U.S. infrastructure overhaul presents opportunities for investment in infrastructure-related stocks, potentially leading to significant gains.



Read more at Nasdaq: Berkshire (BRK.B) Trims BAC Stake: What Should Investors Know?