Warren Buffett (Trades, Portfolio) has revealed an additional 1.67% boost to his holding of Bank of America Corp. (BAC, Financial) according to GuruFocus’ Real-Time Picks, a Premium feature.
Buffett follows a value investing strategy that is an adaptation of Benjamin Graham's approach. His investment strategy of discipline, patience and value consistently outperforms the market and his moves are followed by thousands of investors worldwide. He seeks to acquire great companies trading at a discount to their intrinsic value, and to hold them for a long time. He will only invest in businesses that he understands, and always insists on a margin of safety.
Buffett’s Bank of America history
Buffett first bought into Bank of America in 2011 as the company was struggling to recover from the 2008 financial crisis. With the purchase of 50,000 preferred shares, he was able to secure himself a 6% dividend and warrants to purchase 700 million common shares.
These shares were guaranteed at a price of $7.14 until 2021. Within 24 hours of the purchase, Buffett was already looking at profits upwards of $1 billion by activating those warrants. However, the Oracle of Omaha is not one to make rash decisions.
Watching his money grow, Buffett sat on the preferred shares until 2017, when Bank of America passed its annual stress test with the Federal Reserve. This allowed the company to up the annual dividend to 48 cents per share, which exceeded what Buffett was making via his preferred shares.
According to CNBC, Buffett netted approximately $12 billion with the acquisition of the 700 million shares he had access to as shares were trading at $24.58. Since the original acquisition of common shares in 2017, Buffett has continued to add to his holding.
As previously reported, Buffett added 6.12% to his holding between the end of the first quarter and July 22, with the purchase of 56.65 million shares. These shares were acquired at an average price of $23.99.
July 27 saw Buffett further boost his holding in Bank of America with the addition of 16.42 million shares. The shares were purchased at an average price of $24.22, up 23 cents per share since his purchases last week. Overall, the purchase represented a 1.67% increase in the holding and a 0.23% impact on the portfolio. GuruFocus estimates the total gain on the holding at -4.37%
Bank of America
Bank of America is one of the largest financial institutions in the United States, with more than $2.3 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking and global markets.
Bank of America's consumer-facing lines of business include its network of branches and deposit-gathering operations, home mortgage lending, vehicle lending, credit and debit cards and small-business services.
On July 28, the stock was trading at $24.14 per share with a market cap of $209.15 billion. Since 2018, the shares have been trading below intrinsic value according to the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 5 out of 10. The company has significantly cut back on debt since 2011 and the cash-to-debt ratio of 1.06 places it just below the industry median. In recent years, cash flows and income have been on the rise.
Buffett is currently the top shareholder with 11.52% of shares outstanding. Other top guru shareholders include Vanguard Group Inc. (Trades, Portfolio), BlackRock Inc. (Trades, Portfolio), State Street Corp. (Trades, Portfolio), FMR LLC (Trades, Portfolio) and Wellington Management Group LLP (Trades, Portfolio).
Portfolio overview
At the end of the first quarter, the portfolio contained 50 stocks and was valued at $175.53 billion. By weight, the portfolio is most heavily invested in the technology (37.01%), financial services (37.00%) and consumer defensive (15.74%) sectors.
Disclaimer: Author owns no stocks mentioned.
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