Berkshire Hathaway, the Warren Buffett-helmed conglomerate that owns Geico, upped its stake in Bank of America (BoA) by over $800 million, in what the Financial Times (FT) reported is a vote of confidence in the lagging U.S. banking sphere.
Berkshire purchased 34 million shares in BoA, which is a 4 percent increase of its holding in the company, FT reported. Berkshire now has around $24.1 billion invested, which comes out to an 11.3 percent stake.
Inversely, Berkshire has been trimming off its investments in other banks, selling most of its stake in Goldman Sachs and some of its position in J.P. Morgan Chase, U.S. Bancorp and Bank of New York Mellon.
The pandemic wreaked havoc on the banking sector like it did the rest of the economy, sending BoA shares and the value of the KBW Bank Index, which is one of the more widely-tracked measures of the health of the industry, down 30 percent since February, FT reported.
Buffett's investments in BoA connects to the aftermath of the 2008 financial crisis, in which he made millions buying stake in BoA, purchasing preferred shares with warrants coming attached. Because of the warrants, Berkshire could buy 700 million shares in the company for around $7 a piece. Berkshire did so in 2017, when BoA shares were trading at $24, according to FT.
For the past few years, Buffett's company has been quiet in lieu of the giant acquisitions for which it was usually known, and Berkshire has faced criticism from investors over the slow pace of dealmaking as of late, with its heavy concentration on financial stocks weighing it down this year so far.
But the BoA shares as well as Berkshire's purchase of Dominion Energy's $10 billion natural gas transmissions business earlier this month mark somewhat of a return, FT reported.
Buffett has been optimistic in the face of the pandemic, saying the virus wouldn't stop the progress of the U.S. or the world, and despite "interruptions," he said he thought the world would eventually come out the better for the progress being made.