Buffett's actions imply you shouldn't buy Bank of America stock above this price

By Tomi Kilgore

Buffett's Berkshire Hathaway has sold nearly $10 billion worth of BofA shares since mid-July, but still owns a little more than 10% of shares outstanding

What might sound like a weird coincidence, Warren Buffett's Berkshire Hathaway Inc. has sold shares of Bank of America Corp. for 12 straight days, for the third time in less than three months.

But if you look where the stock (BAC) was trading when Buffett sold, and where it was trading when he didn't sell, it suggests it's not a coincidence, as the timing of the sales was very calculated.

It's no secret that Buffett has been selling BofA's stock. As the bank's largest shareholder, Buffett owns through his investment vehicle more than 10% of the outstanding shares, so it has to publicly disclose any trades in the stock within two business days.

BofA Chief Executive Brian Moynihan even commented on the selling last month at the Barclays Global Financial Services Conference, saying he didn't know, and can't ask, Buffett about his intentions, but said "he's been a great shareholder."

Buffett had previously disclosed that it owned 1.03 billion shares of Bank of America as of June 30.

Since then, Form 4 filings with the U.S. Securities and Exchange Commission showed that he started selling BofA stock on July 17.

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The sales lasted for 12-straight trading sessions. A total of 90.4 million shares were sold during that period, at prices ranging from $44.07 down to $39.47, to value the shares sold at $3.82 billion.

From Aug. 2 to Aug. 14, a time when the stock closed below $39 each day, Buffett didn't sell.

Then Buffett sold for three-straight sessions, from Aug. 15 to Aug. 19, when the stock had bounced to close back above that $39 threshold.

There was a three-day pause in selling, as the stock closed below $39 on Aug. 20 and Aug. 21; it closed above $39 on Aug. 22, but had opened and spent most of that session below that level. A total of 14 million shares were sold between $39.65 and $39.27.

The selling resumed on Aug. 23, and lasted for 12 straight sessions through Sept. 10. The stock closed above $39 in 11 of those sessions. On Sept. 6, the stock closed at $38.76, but had opened at $39.77 traded as high as $39.88 intraday - Berkshire sold its BofA shares that day at $39.67.

During that streak, Buffett sold 70.3 million shares valued at $2.82 billion, at prices ranging from $40.66 to $39.30.

There was no selling the next three sessions, with the stock closing at $39 on Sept. 11, at $38.78 on Sept. 12 and at $38.65 on Sept. 13. It closed at $39.10 on Sept. 16, but after opening at $38.81.

The latest streak started on Sept. 17. Through Oct. 2, Buffett sold a total of 64.1 million shares valued at $2.56 billion, at prices ranging from $40.78 to $39.27.

With the stock opening Thursday at $38.98, and trading in an intraday range of $38.73 to $39.11 as of midday, it probably wouldn't be a coincidence if Buffett didn't sell.

In total, Buffett has sold 238,731,093 shares, valued at $9.75 billion, at a weighted average price of $40.85. He still owns 794,120,913 shares, or about 10.2% of the shares outstanding. At current prices, his stake is valued at about $30.9 billion.

If Buffett's stake drops below 10%, which would imply the sale of more than 18.2 million shares, then he would no longer be obligated to publicly disclose his trades within two business days.

When BofA CEO Moynihan was asked at the Barclays conference on Sept. 10 about his thoughts on Buffett's sales, he said that "he's been a great investor for our company," and had made two large investments in the bank in times of need.

The first was a $5 billion investment to buy about 700 million shares during the depths of the 2008-2009 financial crisis. The second was about another 300 million shares bought in the 2018 and 2019 timeframe.

"And so he sold a chunk," Moynihan said, according to an AlphaSense transcript.

"[I] don't know what exactly he's doing, because frankly, we can't ask him. We wouldn't ask." Moynihan added.

He noted that the market was "absorbing" the sales, as shares sold each day were well below that daily trading volume - the average volume over the past 30 days has been 37.6 million shares, according to FactSet.

"And we're buying the stock, a portion of the stock, and so life will go on," Moynihan said.

Steve Gelsi contributed.

-Tomi Kilgore

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10-03-24 1214ET

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