Bank of America Corp (NYSE: BAC) CEO Brian Moynihan has praised Warren Buffett, the renowned investor, despite Buffett’s recent decision to reduce his stake in the financial services giant.
Speaking at a global financial services conference, Moynihan expressed appreciation for Buffett’s support during a critical period for the company. Moynihan said:
He’s been a great investor for our company and stabilized us when we needed it
He was referring to Buffett’s $5 billion investment in Bank of America during the aftermath of the global financial crisis.
That initial investment, split between preferred stock and warrants, helped the bank regain its footing during a turbulent time.
Buffett’s long-term relationship with Bank of America solidified in 2017 when his conglomerate, Berkshire Hathaway, converted the warrants, making it the bank’s largest shareholder.
Buffett continued to add to his position, purchasing an additional 300 million shares in early 2019.
However, recent months have seen a change in strategy as the legendary investor has begun trimming his stake.
Buffett sells 5.8 million more Bank of America shares
Bank of America began the year as the second-largest holding in Berkshire Hathaway’s portfolio, trailing only Apple.
However, Buffett has sold approximately 175 million shares of the bank, totaling $7.2 billion.
As of mid-September, the Oracle of Omaha’s stake in Bank of America has dropped to 11.1%, with around 858 million shares still in Berkshire Hathaway’s portfolio.
When asked about the reasoning behind Buffett’s decision to sell, Moynihan admitted that he had no insight into the investor’s motivations.
I don’t know exactly what he’s doing, because frankly, we can’t ask him. But the market is absorbing the stock … and life will go on.
Is Bank of America stock still a buy?
Despite Buffett’s recent sales, Bank of America’s stock has proven to be a solid investment over the years.
When Buffett first bought in 2011, the stock was trading at just $5.50 per share.
Today, shares are hovering around $40, reflecting the tremendous profitability of his investment.
Although the stock has dipped more than 10% from its mid-July highs, it remains up over 20% from its year-to-date low.
Analysts at Piper Sandler see further upside, with expectations of a rebound in net interest income (NII).
In its second-quarter earnings report, Bank of America reported a 3% decline in NII, but also signaled optimism for future growth.
With a current price target of $42 from Piper Sandler and a 2.65% dividend yield, Bank of America remains well-positioned for long-term investors, especially as the US faces potential economic challenges.
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