Warren Buffett's Strategic Shift from Bank of America to High-Yield REIT Lamar Advertising: Assessing the Rationale and Implications in a High-Interest-Rate Environment

Warren Buffett's Berkshire Hathaway has recently executed a notable portfolio reallocation, divesting a significant portion of its stake in Bank of America while acquiring a meaningful position in Lamar Advertising, a high-yield REIT. This move, occurring amid a high-interest-rate environment, underscores Buffett's evolving investment strategy and offers insights into how he navigates macroeconomic headwinds. By analyzing the rationale and implications of this shift, we can better understand the interplay between sector-specific risks and Buffett's long-term value-oriented approach.

The Exit from Bank of America: Profit-Taking and Macro Prudence

Berkshire Hathaway has reduced its Bank of America stake by 45% since mid-2024, selling 464.78 million shares across five consecutive quarters. This aggressive divestment aligns with Buffett's historical tendency to lock in gains when valuations appear stretched or when macroeconomic risks emerge. The rationale for the sale likely includes both profit-taking and concerns about the bank's future profitability in a prolonged high-rate environment.

High interest rates, while initially boosting banks' net interest margins, create long-term uncertainties. For instance, elevated rates have led to tighter lending standards and increased loan loss provisions, particularly for institutions with flexible-rate loans. Bank of America, like many peers, faces pressure to balance growth with risk management in commercial real estate (CRE) lending, where caution has become the norm. Buffett's exit may reflect a strategic pivot away from these sector-specific vulnerabilities.

The Lamar Advertising Bet: Stability and Growth in a High-Rate World

In contrast, Berkshire's $144 million investment in Lamar Advertising-acquiring 1.17 million shares at an average price of $116-signals confidence in the REIT's resilience. Lamar, a leader in the U.S. and Canadian outdoor advertising markets, operates 360,000 analog and digital out-of-home locations and reported $2.21 billion in 2025 revenue. Its business model, characterized by recurring revenue streams and high customer retention, aligns with Buffett's preference for "strong moats" and predictable cash flows.

Lamar's performance in 2025 further justifies the investment. The company reported 2.9% acquisition-adjusted revenue growth in Q3 2025, driven by digital and programmatic advertising, which grew 3.4% and 13%, respectively. Its airport and logo signage divisions also posted robust gains, and the integration of the Verde Outdoor acquisition added 1,500 billboard faces, enhancing market penetration. With $363 million in liquidity and debt metrics within covenant limits, Lamar's financial health appears well-positioned to withstand elevated borrowing costs.

Strategic Rationale: Hedging Against Rate Risks

Buffett's shift from banking to REITs reflects a nuanced understanding of sector dynamics in a high-rate environment. Banks, while benefiting from short-term margin expansion, face long-term challenges such as loan delinquencies and regulatory scrutiny. REITs, meanwhile, are navigating a mixed landscape: industrial and retail sectors struggle with higher borrowing costs, but healthcare and residential REITs thrive due to inelastic demand according to analysis. Lamar, as an outdoor advertising REIT, occupies a unique niche with low capital intensity and high demand elasticity, making it less vulnerable to rate shocks than traditional property-focused REITs.

Moreover, Buffett's investment in Lamar aligns with his historical preference for companies with durable competitive advantages. Lamar's national footprint, digital transformation, and strong management team-led by CEO David Whitlock-position it to capitalize on secular trends in advertising, such as the shift to programmatic platforms. The REIT's decision to raise its 2025 AFFO guidance and announce a special year-end dividend also signals confidence in its ability to reward shareholders.

Implications for Berkshire's Portfolio Resilience

Buffett's reallocation highlights a broader strategic theme: hedging against macroeconomic volatility by prioritizing assets with stable cash flows and pricing power. While banks remain integral to the U.S. economy, their earnings are increasingly tied to cyclical factors such as interest rate movements and credit cycles. REITs like Lamar, by contrast, offer exposure to secular growth drivers-such as digital advertising adoption-and are less sensitive to rate fluctuations due to their low leverage and recurring revenue models according to research.

This shift also underscores the importance of sector diversification in a high-rate environment. By reducing exposure to rate-sensitive banks and increasing holdings in high-quality REITs, Berkshire is positioning its portfolio to weather potential downturns while maintaining upside potential. Lamar's 3% earnings growth forecast for 2025 and projected acceleration to 6% in 2026 further reinforce the logic of this move.

Conclusion

Warren Buffett's strategic shift from Bank of America to Lamar Advertising exemplifies his ability to adapt to macroeconomic realities while adhering to his core principles of value investing. The divestment from banking reflects prudence in the face of sector-specific risks, while the Lamar investment capitalizes on a REIT's stable cash flows and growth potential. As interest rates remain elevated, Buffett's reallocation serves as a case study in how to balance risk mitigation with long-term value creation-a strategy that may offer broader lessons for investors navigating today's uncertain markets.