On October 17th local time, according to documents disclosed by the US Securities and Exchange Commission (SEC), Buffett's Berkshire Hathaway Inc. (hereinafter referred to as "Berkshire") continues to significantly reduce its holdings in Bank of America.
According to SEC documents, Berkshire Hathaway sold 8.37 million shares of Bank of America stock for $42.5223 and 320000 shares of Bank of America stock for $43.1891 on October 15, cashing out a total of $370 million.
Image source: SEC
From mid July to present, we have cashed out 10.8 billion US dollars
According to statistics from Interface News reporters, Berkshire Hathaway has disclosed 16 rounds of transaction records since July 17th, with a total of 51 transactions, selling approximately 267 million shares of Bank of America stock at an average price of $40.62 per share, with a cash out amount of up to $10.887 billion (approximately RMB 77.5 billion).
After multiple rounds of reduction, Berkshire Hathaway currently holds 766 million shares of Bank of America. Based on the total share capital of Bank of America at 7.689 billion shares, the shareholding ratio is 9.96%, which has decreased to below the critical threshold of 10%. Previously, during the reduction of holdings, the shareholding ratio also fell below 10%, but was later pushed up to over 10% due to the repurchase of shares by Bank of America.
It is understood that according to relevant regulations, if the shareholding ratio exceeds 10%, it needs to be disclosed within 2 working days; If the shareholding ratio does not exceed 10%, there is no need to disclose the transaction as soon as possible, and it may usually take several weeks to be disclosed in each quarterly report. This means that if the shareholding ratio continues to be less than 10%, the market will not be able to quickly detect Buffett's reduction actions.
According to SEC data, as of the end of the second quarter of this year, Berkshire Hathaway's top ten holdings were Apple, Bank of America, American Express, Coca Cola, Chevron, Western Petroleum, Kraft Heinz, Moody's, Anda Insurance, and Davita Healthcare. From the perspective of company types, companies in industries such as technology, energy, healthcare, and finance all hold seats. At that time, Berkshire Hathaway held 1.033 billion shares of Bank of America stock, with a market value of $41.077 billion, making it Berkshire's second largest position.
Regarding this round of reduction in holdings, Yang Delong, Chief Economist of Qianhai Open Source Fund, mentioned that some people believe it is due to the Federal Reserve's interest rate cuts or the shrinking profits of Bank of America; There are also market speculations that Buffett's sale of Bank of America stocks is mainly due to overvaluation.
As a comparison, Berkshire Hathaway has recently increased its holdings in Anda Insurance, which is also a financial stock. In the first quarter of this year, Anda Insurance appeared as a "mysterious stock" for the first time in Berkshire Hathaway's important positions, attracting market attention.
Previously, due to concerns about the impact of disclosure on stock prices, Berkshire Hathaway applied to the SEC to temporarily keep the position confidential and did not make it public. As of the end of the second quarter, Berkshire Hathaway held 27.03 million shares of Anda Insurance, an increase of 1.11 million shares from the end of the first quarter, with a market value of $6.896 billion, making it Berkshire Hathaway's ninth largest position.
Anda Insurance is a large global insurance company with operations in 54 countries and regions, including insurance and reinsurance. After appearing on Berkshire Hathaway's list on May 15th, Anda Insurance was highly sought after by investors in the secondary market, with its stock price rising from $251 per share to $302 per share today.
It is worth mentioning that in addition to significantly reducing its holdings in Bank of America, Berkshire Hathaway has also sold a large amount of Apple stocks this year. The company's holdings of Apple stocks have decreased significantly from 789 million at the end of the first quarter to 400 million at the end of the second quarter, almost halving, but still remain the largest position.
2011 'Bottom fishing' by Bank of America
The frequent reduction of holdings by giants seems to have little impact on the stock price of Bank of America.
On July 16th, Bank of America closed at $43.8 per share. On October 17th, Bank of America's stock price closed at $42.6 per share, with a latest total market value of $327.542 billion.
From a monthly performance perspective, Bank of America recorded gains of over 1% in July and August, and a decline of nearly 2% in September. But since October, the stock price has performed positively, rising by 7.36%.
It is reported that Berkshire Hathaway invested heavily in Bank of America in 2011, when the bank's stock price was at a historic low and fell below $4 per share that year. During the downturn of Bank of America, Buffett obtained the bank's preferred stock and warrants for $5 billion. For a long time, Bank of America has played an important role in Berkshire Hathaway's holdings. Therefore, Buffett's reduction in holdings this time has attracted particular market attention.
Yang Delong believed that Buffett began to withdraw quietly when the US stock market was climbing. He kept a large amount of capital positions to prevent the bursting of the US stock foam, and then went bargain hunting when the next round of US stock market showed an irrational decline. It is said that this is precisely the important reason why Buffett has stood firm in the investment market for a long time. If he encounters overvaluation, he will reduce his holdings, and when the market experiences irrational decline, he will decisively buy.
It should be pointed out that a few years ago, Buffett also sold a large number of other financial stocks, including reducing positions in Goldman Sachs and JPMorgan Chase.
If we look at Bank of America's performance, its third quarter financial report released on October 15th actually slightly exceeded market expectations. Data shows that Bank of America's total revenue in the third quarter was $25.3 billion, up 0.4% year-on-year from $25.2 billion in the same period last year; Net profit was 6.9 billion US dollars, compared to 7.8 billion US dollars in the same period last year, a year-on-year decrease of 11.5%; Earnings per share were $0.81, compared to $0.90 in the same period last year. At the same time, the Board of Directors of Bank of America announced a stock dividend plan for the fourth quarter of 2024, with a dividend of $0.26 per share.
Recently, Morgan Stanley raised its target price for Bank of America from $47 to $48; Barclays has raised its target price for Bank of America from $49 to $53, maintaining its' overweight 'rating. According to its official website, Bank of America currently serves approximately 69 million consumers and small business clients, with around 3700 retail financial centers.
The US banking industry may continue to be under pressure
There have been numerous discussions in the market regarding Buffett's recent reduction in holdings, with more viewpoints suggesting that it is mainly due to the pressure on the banking industry caused by the Federal Reserve's interest rate cuts.
On September 18th, the Federal Reserve announced a 50 basis point reduction in the target range for the federal funds rate, to a level between 4.75% and 5.00%. This marks the first interest rate cut by the Federal Reserve since March 2020, and also signifies a shift from a tightening cycle of monetary policy to an easing cycle.
While the United States has opened the channel for interest rate cuts with a "radical" 50 basis points, it has also brought great challenges to the profitability of banks.
Ma Tianjiao, a postdoctoral fellow at the Bank of China Research Institute, analyzed to Interface News reporters that due to the greater sensitivity of bank asset yield to changes in benchmark interest rates than debt cost rate to changes in benchmark interest rates, the asset repricing speed is actually faster than the liability repricing speed under the Federal Reserve's interest rate cuts. The US banking industry is facing pressure to narrow the net interest margin, and net interest income and profitability may be affected.
In the third quarter of this year, Bank of America's net interest margin was 1.92%, a decrease of 1 basis point compared to the second quarter and a decrease of 19 basis points compared to the same period last year.
The current scale growth of the US banking industry is not optimistic. The fourth quarter report of the China Banking Research Institute pointed out that since 2024, the global economy has continued to show a weak recovery trend, and the banking industries of various economies have flexibly adjusted their business arrangements according to their actual operations. The scale growth has shown a trend of differentiation with both progress and retreat. Among them, developed economies such as the United States, the eurozone, and the United Kingdom have gradually slowed down their expansion pace and even experienced slight contraction in the banking industry against the backdrop of weak economic growth and intensified financial market volatility. At the end of June, the asset size of the US banking industry was approximately $24.0 trillion, a year-on-year increase of 2.1%, with relatively slow growth.
Looking ahead to the future, Ma Tianjiao believes that there is still significant uncertainty in the path of interest rate cuts, and the US economy still faces certain difficulties in achieving a stable "soft landing". The liquidity and active prudent management ability of the US banking industry's assets and liabilities are being tested, and weak areas such as commercial real estate risks and credit risks of low - and middle-income group debt still deserve high attention.
