Warren Buffett warns investors of $5.4 billion after dumping popular stocks — and Wall Street should pay attention

Warren Buffett’s Berkshire Hathaway has sold another large stake in Bank of America, a bad sign for Wall Street investors.

The Omaha-based financial conglomerate saw its stake in BofA fall by about 150 million shares, bringing its total turnover since mid-July to nearly $5.4 billion.

Berkshire has traditionally been bullish on financial companies. Some analysts see Buffett’s sell-off as a stark warning that tougher times may be ahead.

BofA has been Buffett’s favorite stock for the past seven years and the bank’s largest individual shareholder.

The fact that he is selling such a large number of shares in such a short time could indicate economic turmoil or further market unrest is on the way.

Warren Buffett’s Berkshire Hathaway has sold another major stake in Bank of America, bringing total revenue since mid-July to nearly $5.4 billion

Buffett’s massive cash-in of Bank of America shares could be a sign of uncertainty on Wall Street

Brian Moynihan, the bank’s CEO, has managed to entice investors by rewarding them with dividends and share buybacks.

But the fact that Buffett appears to have sold nearly 15 percent of his company’s shares in BofA in just six weeks suggests that the Oracle of Omaha, as Buffett is known, is concerned about the state of the economy and the stock market.

According to LSEG data, Berkshire remains BofA’s largest shareholder with a stake of about 11.1%.

Under legal requirements, Berkshire Hathaway must continue to report revenue regularly until its stake falls below 10%.

Buffett, one of the world’s most respected investors, began investing in the bank in 2011 when Berkshire purchased $5 billion of preferred stock.

Berkshire’s stake in BofA fell by about 150 million shares, in what some analysts see as a clear warning sign to Wall Street that tougher times may be ahead.

The purchase signaled confidence in Moynihan’s ability to turn the lender around after the 2008 financial crisis.

In April 2023, Buffett, 94, told CNBC that he liked Moynihan “tremendously” and that he did not want to sell the bank’s shares at the time.

Some analysts have suggested that Buffett is simply taking profits on the stock, which has risen nearly 10 percent over the past six months and 38 percent over the past year.

“The sale of Berkshire BofA is simply profit taking after acting opportunistically when the stock was much cheaper,” said Christopher Marinac, director of research at Janney Montgomery Scott.

“Buffett and Berkshire Hathaway likely reduced their stake in Bank of America to bring it in line with Apple after recently cutting that stake in half,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

The billionaire investor isn’t known for making a profit through sales, but he does occasionally see a rise, Schulman added.

Buffett has also sold other significant holdings, including half of his stake in Apple.

The company’s cash reserves had grown to a staggering $277 billion by the end of June.

“Building the cash position… when I look at the alternative of what’s available in the equity markets and the composition of what’s happening in the world, we think it’s quite attractive,” Buffett said at the company’s annual meeting in May.

Bank of America Chairman and CEO Brian Moynihan has also managed to entice investors by rewarding them with dividends and stock buybacks

Most of that money is invested in short-term investments, which at the end of the second quarter were worth $234.6 billion, more than the amount the Federal Reserve itself holds.

Last month, Buffett’s Berkshire Hathaway became the first non-tech company to reach a $1 trillion valuation.

Buffett’s conglomerate joins a small group of elite companies that have surpassed the $1 trillion mark, including Alphabet, Google’s parent company, Meta, Nvidia, Apple, Microsoft and Amazon.

Shares of the Nebraska-based company have risen about 25 percent this year, outpacing the broader S&P 500, which has risen 15 percent.

The coveted $1 trillion milestone was reached just days before the ‘Oracle of Omaha’ turned 94.

The milestone “is a testament to the company’s financial strength and franchise value,” Berkshire analyst CFRA Research said CNBC.

“This is significant at a time when Berkshire is one of the few remaining conglomerates still in existence today.”

Berkshire Hathaway is a sprawling business empire with a $285 billion stock portfolio that Buffett has built up over sixty years, making him one of the richest people in the world.

The conglomerate continues to focus on old-fashioned investments as the owner of BNSF Railway, insurance companies and Dairy Queen.

“It’s a tribute to Mr. Buffet and his management team, because ‘old economy’ companies built Berkshire.