Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) ( NYSE:BRK.B) made history on Wednesday by surpassing a $1 trillion market cap for the first time. This achievement places Berkshire Hathaway among an elite group of U.S. companies that have reached this milestone, making it the first non-tech company to do so. The news comes as Berkshire continues to adjust its portfolio, particularly with significant sales of Bank of America (NYSE:BAC) stock.
Historic Milestone for Berkshire Hathaway Market Cap
Berkshire Hathaway’s ascent to a $1 trillion market cap is a testament to the company’s consistent performance and Buffett’s strategic investment decisions. Berkshire Hathaway joins a select group of six other U.S. companies, primarily in the technology sector, that have achieved this significant market valuation. This milestone underscores the diversified strength of Berkshire’s portfolio, which includes substantial holdings in various industries beyond technology.
The market cap milestone is particularly notable given that it comes on the heels of Berkshire’s recent decision to sell a significant portion of its holdings in Bank of America, one of the firm’s key investments over the past decade.
Strategic Sales of Bank of America Stock
On Tuesday, Berkshire Hathaway disclosed that it had sold another 24.6 million shares of Bank of America, generating approximately $982 million. This move continues a trend that began in mid-July, with Berkshire selling Bank of America stock in five of the past six weeks. In total, these sales have brought in $5.4 billion for Berkshire.
Bank of America’s stock has declined by more than 9% during this period, though it remains up by about 18% year-to-date, lagging behind the larger gains seen by other major banks like Goldman Sachs (NYSE:GS), JPMorgan Chase (NYSE:JPM), and Citigroup (NYSE:C).
Despite these sales, Berkshire Hathaway remains the largest shareholder of Bank of America, holding over 900 million shares valued at more than $35 billion. This continued stake reflects Buffett’s long-term confidence in Bank of America, even as the firm adjusts its portfolio.
Buffett’s Relationship with Bank of America
Warren Buffett’s relationship with Bank of America dates back to 2011, when he invested $5 billion in the bank during a time of financial turmoil. Bank of America was struggling to recover from the 2008-2009 financial crisis, which was exacerbated by the subprime housing meltdown. Buffett’s investment was not only a bet on the bank’s recovery but also a show of support for the new leadership under CEO Brian Moynihan.
The endorsement from Buffett helped restore market confidence in Bank of America, and its stock has since climbed nearly 400%. Even as Buffett began divesting from other major banks, such as JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Goldman Sachs (NYSE:GS), he continued to hold onto Bank of America, highlighting his trust in Moynihan’s leadership and the bank’s long-term prospects.
The Bigger Picture: Berkshire Hathaway’s Portfolio
Bank of America now accounts for about 15% of Berkshire Hathaway’s portfolio, making it the firm’s third-largest holding after Apple (NASDAQ:AAPL) and American Express (NYSE:AXP). This significant position underscores the importance of Bank of America within Berkshire’s broader investment strategy, even as the firm reduces its exposure to the financial sector.
Buffett’s decision to continue selling Bank of America stock while retaining a substantial stake reflects his cautious approach to the banking sector. At Berkshire’s annual shareholder meeting in May 2023, Buffett noted, “We’re very cautious about ownership of banks and we do remain with one bank… I like Bank of America and I like the management.”
Conclusion: A New Chapter for Berkshire Hathaway
Berkshire Hathaway’s $1 trillion market cap milestone marks a new chapter in the company’s storied history. While the firm continues to adjust its portfolio, including the strategic sale of Bank of America stock, it remains a dominant force in the investment world. As Warren Buffett continues to navigate the complexities of the market, Berkshire Hathaway’s performance will be closely watched by investors and analysts alike.
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