Warren E. Buffett's Berkshire Hathaway Inc. has sold its stake in
Bank of America Corp., ending an investment that spanned three and a half years, in which the stock lost more than two-thirds of its value.
His firm had no shares in BofA Ticker:(BAC) at the end of last year, compared with 5 million shares three months earlier, Berkshire Hathaway said in a regulatory filing that listed the company's U.S. stock holdings.
Berkshire Hathaway, where Mr. Buffett serves as chief executive and head of investments, started its BofA stake with the purchase of 8.7 million shares in the second quarter of 2007. BofA's chief executive at the time, Kenneth Lewis, was expanding through acquisitions and telling investors that the U.S. housing slump would be over within months.
“[Mr. Buffett is] closing out a loser,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett's Omaha” (McGraw-Hill, 2008), whose Ram Partners LP invests in Berkshire Hathaway and BofA. “We bought it during the crisis, but its earnings power coming out of the crisis has been reduced.”
BofA's stock is trading below $15, down from $48 in June 2007.
Mr. Buffett is reshaping Berkshire Hathaway's stock portfolio amid changes among the company's investment managers.
Lou Simpson, once identified by Mr. Buffett as his emergency stand-in, retired late last year. Berkshire Hathaway, the biggest shareholder of Coca-Cola Co. Ticker:(KO) and
Wells Fargo & Co. Ticker:(WFC), hired former
hedge fund manager Todd Combs to help Mr. Buffett with investments.
Berkshire Hathaway also eliminated its stakes in Becton Dickinson & Co. Ticker:(BDX), Comcast Corp. Ticker:(CMCSA), Fiserv Inc. Ticker:(FISV), Lowe's Cos. Ticker:(LOW), Nalco Holding Co. Ticker:(NLC) and Nike Inc. Ticker:(NKE) in the fourth quarter. In November, Berkshire Hathaway disclosed that it had sold holdings of Home Depot Inc. Ticker:(HD), trash hauler Republic Services Inc. Ticker:(RSG) and Iron Mountain Inc. Ticker:(IRM), a provider of records management.
Mr. Buffett's U.S. portfolio had 25 stocks and a value of about $52.6 billion at the end of December.
“It makes one wonder if he's setting up his portfolio for transition,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors, a Berkshire Hathaway shareholder. “It certainly would be more helpful when someone comes in to the portfolio to have 25 names rather than 50 names, where they'd have to spend a lot of time cleaning up messes.”
Brian T. Moynihan, BofA's chief executive, who was named to replace Mr. Lewis in December 2009, faces increased regulation and lawsuits from investors who claimed that the bank sold faulty mortgages. Mr. Moynihan oversaw a $2.2 billion loss last year when BofA's shares dropped 11%, the worst performance among the 10 biggest U.S. banks.
Jerry Dubrowski, a BofA spokesman, said that the bank doesn't comment on investor purchases or sales of its stock.
Mr. Buffett, who is also Berkshire Hathaway's chairman, has trimmed the stock portfolio since the 2008 financial crisis and focused on buying whole companies. He acquired Burlington Northern Santa Fe last year for $26.5 billion to add a railroad to Berkshire Hathaway's collection of more than 70 units in industries spanning insurance, energy and ice cream.
Representatives of other firms in which Berkshire Hathaway has divested its stake either declined to comment or couldn't be reached.
Mr. Buffett has said that his roles as head of investments and operations will be divided among more than one successor. Mr. Combs specialized in financial services investments at
hedge fund Castle Point Capital Management LLC.
Mr. Buffett has said that he built his equity portfolio by buying and holding stocks of companies that he thinks have durable competitive advantages. Berkshire Hathaway's stake in
Wells Fargo, the biggest U.S. home lender, was valued at more than $10 billion at the end of December after Berkshire added shares in the fourth quarter, according to data compiled by Bloomberg.
Mr. Buffett told CNBC in 2009 that while BofA excelled at gathering deposits, “they've got some activities that are maybe less wonderful.”
In September 2008, Mr. Lewis overpaid for Merrill Lynch & Co. Inc. in a deal struck the same day that Lehman Brothers Holdings Inc. filed for bankruptcy protection, Mr. Buffett told the Financial Crisis Inquiry Commission. BofA completed its $18.5 billion purchase of Merrill Lynch in January 2009.
Mr. Lewis “paid a crazy price, in my view,” Mr. Buffett said. “He could have bought them the next day for nothing because Merrill was going to go when Lehman went.”
