Warren Buffett's Berkshire Invested $800 Million In Bank Of America
Warren Buffett's Berkshire Hathaway increased its stake in Bank of America (BofA) to 11.3% of shares, acquiring them for $800 million this week.
According to the FT, Berkshire acquired 34 million shares of the second-largest US bank, the Bank itself is now valued at $24.1 billion. The purchase of more BofA shares, writes the FT, came after Berkshire sold the vast majority of its stake in Goldman Sachs in early 2020 and reduced its position in JPMorgan Chase. Also, in the first quarter, it slightly reduced its obligations to us banks Bancorp and Bank of New York Mellon.
Warren Buffett bought preferred shares of BofA with warrants (securities that give the holder the right to buy a proportional number of shares at a specified price for a certain period) immediately after the financial crisis, then invested billions of dollars in them, the FT recalled.
In 2017, warrants allowed the purchase of 700 million shares at just over $7 per share, while they were trading at $24 per share on the stock market during this period.
A week earlier, BofA reported a second-quarter net profit of $3.5 billion, half the level of 2019. Profit decreased due to the $5 billion cost of compensating for loan losses related to the coronavirus pandemic. As the publication notes, the Bank's reserves are significantly smaller than the size of its balance sheet, and BofA itself explained this difference by more conservative lending than that of larger banks.
New purchases of BofA shares and Berkshire's takeover of Dominion Energy's natural gas transportation business in July ($ 10 billion) show that Buffett has finally found attractive assets to invest in. Berkshire had previously done without major acquisitions for more than four years. Investors have criticized Berkshire's relatively slow pace of dealmaking, as its money supply has grown to more than $137 billion. Shares of financial companies account for more than a third of Berkshire's $181 billion stock portfolio (based on the results of the first quarter of 2020). Berkshire shares have fallen 15% in value this year, which could be the worst drop among S & P 500 companies in 20 years, the newspaper said.
Buffett is one of the world's largest investors and Chairman of Berkshire Hathaway. According to Forbes, its total wealth in 2020 is $72 billion. Buffett is ranked fifth in the global billionaires' rating, which is updated annually by the publication.