In the last three days, Warren Buffett’s Berkshire Hathaway has sold approximately 9.54 million shares of Bank of America Corporation stock.
The company still holds 775 million shares, currently valued at $31 billion.
This trend began in July when Buffett reported the sale of 33.9 million shares.
He subsequently sold an additional 174 million shares from mid-July through early September.
More recently, he has sold over 14 million shares, bringing his total stake in the bank below 10%.
This figure is significant because, with his stake now below the 10% threshold, Buffett is no longer required to disclose his sales to regulatory bodies.
For investors, this means they will no longer have immediate insight into whether Buffett is selling more shares.
Buffett has also recently sold nearly half of his stake in Apple, which at one time accounted for nearly 50% of his portfolio.
Buffett to miss out on AI growth
Despite earning billions from his Apple stake, Buffett is not a massive fan of technology.
After reducing his stake in Bank of America, he may partly miss out on the next driver of growth for the bank: Erica AI.
Erica is not new for BAC shareholders, but its AI potential is.
Launched in 2018, Erica was designed to facilitate interactions with clients, helping them with their financial needs.
With the emergence of AI, Bank of America has an opportunity to enhance a product that its customers are already familiar with.
The bank has already allocated $4 billion to enhance its AI capabilities.
Over the years, Erica has helped reduce customer handling times to below one minute, with 98% of customer inquiries being answered quickly.
With AI customer support capabilities, Erica AI has the potential to replace call centers, improving customer service while reducing associated costs.
If Erica becomes as successful as the bank believes, Buffett will miss out on some gains, although he still holds a significant portion of the bank’s stock in his portfolio for now.
Earnings expectations next week
Bank of America is expected to announce its quarterly earnings report next week.
Analysts estimate a decline of over 13% in EPS, despite slightly increasing revenue.
Over the last 30 days, the EPS estimate has already been revised downward, suggesting that the market expects relatively poor performance from America’s second-largest bank.
An EPS miss would be detrimental to investors, especially considering Buffett’s sales during the reported quarter.
Now that investors will no longer have insights into Buffett’s sales, they will need to closely monitor the bank’s fundamentals to maintain confidence in their investments.
Whatever the reasons behind Buffett’s sales, a lower interest rate environment in the short term could help the stock re-rate, potentially driving it higher even with lower earnings.
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