Buying shares of Bank of America (NYSE: BAC) is a habit Warren Buffett just can't seem to shake.
According to a regulatory filing submitted late Tuesday, the renowned investor's Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has spent $2.07 billion since the middle of last month on Bank of America common stock in a series of purchases.
This gives Berkshire a stake of 11.9% in the big lender, making it the largest publicly traded company in its portfolio in terms of total number of shares. Bank of America is Berkshire's No. 2 holding in terms of total market value (No. 1 is Apple).
Berkshire typically offers little commentary, if any, on its stock buys, so it is unclear why Buffett and his colleagues are so bullish on Bank of America. Relative to many rival lenders, it has a strong balance sheet. And its dividend is considered to be more secure than those of its peers (such as Wells Fargo, another large Berkshire investment, which cut its dividend by 80% last month).
Buffett is a long-term fan of companies in the finance sector. He has routinely bought shares of banks and other financial services companies in their times of struggle and distress. Outside of Bank of America, much of Berkshire's equity portfolio is made up of stocks in the sector.
Frequently, Buffett/Berkshire purchases engender the "Buffett effect," in which the new investments rise in price simply because the famed investor bought them. That might have been the case today with Bank of America: The company's shares closed 1.5% higher, easily eclipsing the gains of the top equity indexes on the day.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares) and recommends the following options: short September 2020 $200 calls on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short January 2021 $200 puts on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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