FRI, OCT 04, 2024

WARREN BUFFETT WATCH

Bank of America stock sales nearing $10B and 10%

Extending its consecutive-session selling streak to 12, Berkshire Hathaway sold another 8.5 million shares of Bank of America during the first three days of this week, bringing in $338 million.

That puts the total proceeds at almost $9.8 billion since Berkshire started chopping away at its BAC holding in mid-July.

So far, it has sold 238.7 million shares at an average price of $40.85. cutting its position by 23.1%.

Berkshire still owns 794 million shares worth $31.9 billion at today's close of $40.11. It remains the bank's largest shareholder, ahead of the Vanguard Group with 639 million shares.

Berkshire owns 10.2% of BAC's outstanding shares, bringing it closer to the 10% level (776 million shares) at which it will no longer be required to report additional changes within two business days.

Based on average daily sales of 5.6 million shares (for the days in which there were sales), Berkshire could reach 10% with another three to four days of sales.

Speculation centers on three possible ultimate goals for the selling:

Getting the stake to just under 10%
Selling everything except the 700 million low-cost shares it originally obtained in 2017 (as Barron's has suggested)
Eliminating the entire position

We probably won't find out what Berkshire actually does until at least mid-February when it will file its end-of-year portfolio snapshot.

BAC's stock price could be a factor in Berkshire's plans for the stock.

While it is down 9.1% from its more than two-year high of $44.13 the day before Berkshire started selling, BAC has remained in the $39-$40 range for the past two months.

A significant sell-off could deter whatever selling strategy Berkshire has in mind now.

Berkshire taking full control of energy subsidiary

Berkshire Hathaway is buying the 8% of Berkshire Hathaway Energy it didn't already own.

In an SEC filing on Monday, BHE said it will give Walter Scott's family $2.4 billion in cash and an undisclosed number of Class B Berkshire shares for the stake.

Scott, who had served on the Berkshire board since 1988 and was a longtime friend of Buffett, died in 2021 at the age of 90.

Since we don't know how many BRKB shares are involved, we don't know the exact purchase price.

Steam rises from one of Berkshire Hathaway Energy Renewables' Cal Energy geothermal plants on February 14, 2024 near Niland, California. (GETTY IMAGES | David McNew)

Barron's, however, says its analysis indicates Berkshire is paying a total of $3.9 billion. That would value BHE at roughly $49 billion, a bit more than half what it was in 2022 when Greg Abel sold his 1% stake to Berkshire.

Andrew Bary writes the much lower valuation may reflect the multi-billion dollar liability BHE faces from wildfire lawsuits.

But even so, he thinks Berkshire got a "very good deal" that was probably negotiated by Buffett himself.

"Buffett likes to affect an amiable Midwestern demeanor, but he is also a very sharp negotiator. Even the estate of a longtime friend doesn't seem to have gotten a break from him."

Yen bond plans spark speculation of more Japanese stock buys

Berkshire is planning its second sale of yen-denominated bonds this year, according to a preliminary prospectus filed with the SEC.

It has reportedly hired two banks to underwrite the sale.

That has sparked expectations Buffett will use the money to increase the company's multi-billion investments in Japan's "trading houses."

Bloomberg quotes one analyst as speculating Berkshire could expand its Japanese holdings to shippers and insurers.

"If it's not a trading company, it will have a big impact on the whole market," says Eiji Kinouchi, chief technical analyst at Daiwa Securities Co.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

WSJ (subscription): Can a ‘Precision Scheduling’ Expert Fix Berkshire Hathaway’s Railroad?

CNBC Pro (subscription): How Warren Buffett decides when to sell a stock, and why he might be dumping Bank of America

HIGHLIGHTS FROM THE ARCHIVE

'You get a lot of mediocrity' (1996)

Warren Buffett shares his views on good management and why the CEOs of the Fortune 500 aren’t like an Olympic team.

BERKSHIRE STOCK WATCH

Four weeks

Twelve months

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Oct. 4, 2024

Berkshire's top holdings of disclosed publicly traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.

Holdings are as of June 30, 2024 as reported in Berkshire Hathaway's 13F filing on August 14, 2024, except for:

Bank of America, which is as of October 2, 2024
Mitsubishi, which is as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

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Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.

-- Alex Crippen, Editor, Warren Buffett Watch

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