Warren Buffett’s $5.4 BILLION warning to investors after he dumps popular stock – and Wall Street better pay attention

Warren Buffett’s Berkshire Hathaway has sold another massive stake in Bank of America – raising red flags in an ominous sign for Wall Street investors.

The Omaha-based financial conglomerate has seen its stake in BofA fall by around 150 million shares, bringing the total sales since mid-July to nearly $5.4 billion.  

Berkshire has traditionally been bullish on financial companies, leading some analysts call Buffett’s sell-off a clear warning that tougher times may lie ahead. 

BofA has been Buffett’s most favored stock over the last seven years and the bank’s largest single shareholder.

His selling of such a large number of shares over such a short period of time could suggest that economic turbulence or further market turmoil in on the way.

Warren Buffett’s Berkshire Hathaway has sold another large stake in Bank of America bringing the total sales since mid-July to nearly $5.4 billion

Buffett's huge cashing in of Bank of America stock could be a sign of uncertainty on Wall Street

Buffett’s huge cashing in of Bank of America stock could be a sign of uncertainty on Wall Street

Brian Moynihan, the bank’s CEO has also managed to entice investors by rewarding investors with dividends and share buybacks.

But the fact Buffett appears to have dumped almost 15 percent of his company’s stake in BofA in just six weeks suggests the Oracle of Omaha, as Buffett is known, has some worries about the state of the economy and stock market.  

Berkshire continues to be BofA’s biggest shareholder with a stake of about 11.1%, according to LSEG data. 

Per regulatory requirements, Berkshire Hathaway has to keep reporting sales regularly until its holding falls below 10%.

Buffett, one of the world’s most revered investors, started investing in the bank in 2011, when Berkshire bought $5 billion of preferred stock. 

Berkshire's stake in BofA fell by around 150 million shares in what some analysts are seeing as clear warning signs to Wall Street that tougher times may lie ahead.

Berkshire’s stake in BofA fell by around 150 million shares in what some analysts are seeing as clear warning signs to Wall Street that tougher times may lie ahead.

That purchase signaled his confidence in Moynihan’s ability to restore the lender to health following the 2008 financial crisis.

In April 2023, Buffett, 94, told CNBC that he liked Moynihan ‘enormously’ and did not want to sell the bank’s stock at the time. 

Some analysts have suggested Buffett is merely taking profits on the stock which has risen almost 10 percent in the last six months and 38 percent over the past year. 

‘The Berkshire BofA sale is just profit taking after being opportunistic when the stock was much cheaper,’ said Christopher Marinac, director of research at Janney Montgomery Scott. 

‘Buffett and Berkshire Hathaway have likely trimmed the Bank of America stake to right-size it proportionate to Apple after recently halving that stock,’ added Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors. 

The billionaire investor is not commonly known for profit taking through sales, but he does occasionally realize upside, Schulman added.  

Buffett has also been selling off other key holdings including half of his Apple stake. 

The company’s cash reserves had grown to a staggering $277 billion by the end of June. 

‘Building the cash position… when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive,’ Buffett said at the company’s annual meeting in May.

Chair and CEO of Bank of America Brian Moynihan has also managed to entice investors by rewarding investors with dividends and share buybacks

Chair and CEO of Bank of America Brian Moynihan has also managed to entice investors by rewarding investors with dividends and share buybacks

Most of that cash is being invested in short-term treasures, valued at $234.6 billion at the end of the second quarter, which is more than the amount the Federal Reserve itself owns.   

Last month Buffett’s Berkshire Hathaway became the first non-tech company to reach a $1 trillion valuation. 

Buffett’s conglomerate joins the small group of elite companies that have passed the $1 trillion mark, including Google‘s parent company Alphabet, Meta, Nvidia, Apple, Microsoft and Amazon.   

The Nebraska-based company’s stock has risen around 25 percent this year, outpacing the wider S&P 500, which is up 15 percent. 

The coveted $1 trillion milestone was passed just days before the ‘Oracle of Omaha’ turned 94. 

The milestone ‘is a testament to the firm’s financial strength and franchise value,’  Berkshire analyst at CFRA Research told CNBC.

‘This is significant at a time when Berkshire represents one of the few remaining conglomerates in existence today.’

Berkshire Hathaway is a sprawling business empire with a $285 billion stock portfolio that Buffett has built up over six decades, making him one of the richest people in the world. 

The conglomerate has continued to focus on old-fashioned investments as the owner of BNSF Railway, insurance companies and Dairy Queen. 

‘It’s a tribute to Mr Buffet and his management team, as “old economy” businesses… are what built Berkshire. 

Source link