Important Takeaways:

• For the better part of six decades, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) CEO Warren Buffett has been one of Wall Street’s most-revered investors. Overseeing a cumulative return of more than 5,650,000% in Berkshire’s Class A shares (BRK.A) since becoming CEO has earned Buffett quite the following, as well as the nickname, “Oracle of Omaha.”
• But sometimes Berkshire’s quarterly operating results, or Form 4 filings with the Securities and Exchange Commission, can tell a more thorough story — even if it’s an unpleasant one.
• Recently, Buffett has been a somewhat aggressive seller of Bank of America (NYSE: BAC) stock. Between July 17 and Aug. 30, Berkshire’s stake in BofA has declined by about 150 million shares, equating to roughly $5.4 billion.
• This $5.4 billion in selling activity is a pretty clear warning to Wall Street and investors.
• The fact that Buffett has dumped nearly 15% of his company’s stake in Bank of America in a span of just over six weeks suggests clear worry about the U.S. economy and stock market. Like pretty much all bank stocks, BofA is cyclical.
• The other issue is it puts Berkshire Hathaway on track for its eighth consecutive quarter of selling more securities than it’s purchased.
• Collectively, Warren Buffett has overseen $131.6 billion more in securities sold than purchased between Oct 1, 2022 and June 30, 2024.
• But the bigger story is what price dislocation will attract Buffett next. Following the financial crisis, Buffett invested $5 billion into Bank of America preferred stock. This helped to shore up BofA’s balance sheet at a time when banks were Wall Street’s chopped liver. More importantly, it gave Buffett access to warrants entitling him the right to buy 700 million shares of BofA stock at $7.14 per share, which he did for Berkshire Hathaway in mid-2017.
• Periods of emotion-driven selling, while brief, have historically been Warren Buffett’s time to shine. With stocks at one of their priciest valuations in history, Buffett’s selling activity foreshadows both the peril and promise of what’s to come.

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