Billionaire Warren Buffett Sold 26% of Berkshire's Stake in Bank of America and Is Piling Into a Financial Juggernaut That's Soared 33,000% Since Its IPO

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There's arguably not a money manager on Wall Street who commands the attention of investors quite like Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) billionaire CEO, Warren Buffett. Although other billionaire money managers might outpace Buffett's annual return from time to time, the greater than 5,500,000% cumulative return the Oracle of Omaha has overseen in his company's Class A shares (BRK.A) since taking over as CEO in the mid-1960s speaks for itself.

Given Buffett's long-term success, it's not uncommon for investors to want to mirror his trading activity. Thanks to Form 13F filings with the Securities and Exchange Commission (SEC), this can be done with relative ease. A 13F is a required filing for institutional investors with at least $100 million in assets under management that provides a snapshot of which stocks these top-tier money managers purchased and sold in the latest quarter.

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Warren Buffett surrounded by people at Berkshire Hathaway's annual shareholder meeting.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Based on select SEC filings and Berkshire's operating cash flow statements, we know that Buffett and his team have been net sellers of stocks for the last two years. This selling activity has been particularly pronounced among his company's top investment holdings, including money-center colossus Bank of America (NYSE: BAC).

The Oracle of Omaha has dumped more than 266 million shares of BofA

Although 13Fs are typically where investors get their juiciest information on trades made by Wall Street's smartest and most-successful asset managers, Form 4 filings can come in just as handy. When Berkshire holds a greater than 10% stake in a public company, it's required to file a Form 4 with the SEC disclosing share acquisitions and dispositions within two business days of a transaction.

Since July 17, Buffett's company has disclosed 16 separate Form 4 filings concerning Bank of America. Over that time, the Oracle of Omaha has overseen the sale of 266,546,544 shares of BofA stock, equating to about 26% of the stake Berkshire had held, as of the end of June.

The all-important question is: Why would Warren Buffett jettison over $10 billion worth of his favorite bank stock?

One possible (benign) catalyst for this selling activity is tax implications. During Berkshire Hathaway's annual shareholder meeting in early May, Buffett suggested that the corporate tax rate would climb in the coming years. Therefore, locking in sizable unrealized gains now in key holdings, such as Apple, should, in hindsight, be viewed as a smart move by Berkshire's shareholders. While BofA wasn't mentioned when Buffett discussed his forecast for corporate taxation, Berkshire has been sitting on a meaningful unrealized gain from its No 3 holding.