Buffett Sells $3.8 Billion in Bank of America Shares Amid Anticipated Fed Rate Cuts

Warren Buffett's Berkshire Hathaway has recently engaged in an eye-catching move, as the investment giant has sold off a significant portion of its shares in Bank of America (BAC) over twelve consecutive days, liquidating about $3.8 billion worth of stock. This strategic reshuffling comes ahead of the anticipated interest rate cuts by the Federal Reserve in September. The latest filings indicate that between July 30 and August 1, Berkshire offloaded 19.22 million shares, reaping $779 million from the sale. Despite these substantial sell-offs, Berkshire still retains over 942 million shares of Bank of America, valued at $37.2 billion as of Thursday’s closing price. Buffett’s history with Bank of America goes back to 2011, beginning with purchases when the shares were trading around $5. Now, the stock price has surged to $39.5, reflecting substantial gains over the past decade. Historically, Buffett has been a staunch supporter of Bank of America, attributing significant confidence to CEO Brian Moynihan’s leadership. The recent bout of selling marks the largest divestment from Bank of America by Buffett in over a decade. While Buffett himself remains silent on the specific reasons behind this move, speculation abounds that inflated stock valuations could be a driving factor. Bank of America’s stock has surged 31% this year, even peaking at $44.44 in mid-July. Moreover, Bank of America’s sensitivity to interest rate changes poses a strategic risk. Having benefited greatly from the aggressive rate hikes since March 2022, the bank now faces potential challenges with the likely rate reductions later this year. Federal Reserve Chair Jerome Powell’s recent signals about a possible rate cut in September could impact the bank’s net interest income, an element not lost on Buffett. Tracing Buffett’s trading history reveals a pattern of strategic exits amid high valuations. In fact, Berkshire has been a net seller of stocks for six consecutive quarters, from Q4 2022 to Q1 2024, shedding $56.09 billion worth of equities. These persistent sales send a clear message that Buffett sees the current stock market as overpriced. Such moves also set a tone for other investors. As a major shareholder, Buffett’s decisions can significantly influence market sentiment. His recent series of sales within nine trading days saw Bank of America’s stock dip on eight occasions, cumulatively dropping over 6%. Buffett’s reputation for prudential trading, coupled with the notable duration and scale of his investments, means his decisions are closely watched. As he maneuvers through current market dynamics, it underscores a cautious approach amidst what he perceives as inflated valuations, even as he continues to hold substantial positions within the bank.