Buffet Radar: Buy Bank Of America (BAC)
Bank of America is Berkshire's largest bank investment and second-largest stake behind Apple. Buffett appears to have doubled down on Bank of America recently: Berkshire sold its investment in Wells Fargo, formerly its largest holding, partly because of a controversy involving bogus accounts; it also sold its shares of JPMorgan Chase. In addition, Berkshire drastically reduced its holdings in US Bancorp and Bank of New York Mellon during the third quarter.
First, the bank has learned from the mistakes made during the financial crisis and has been successfully managed under CEO Brian Moynihan for ten years. The corporation has improved its reputation, avoided unnecessary risks, and steadily increased its deposits and stock prices under Moynihan's management. Buffett, who originally purchased $BAC through a $5 billion Berkshire buy of preferred shares in 2011, has come to like him along the road and seems to appreciate his cautious attitude.
Recent financial figures from Bank of America also demonstrate the company's success in a challenging climate. In the third quarter, its pre-tax income jumped by 10% to $9.2 billion when provisions for credit losses were excluded. Over the previous year, its loan book increased by 12% to $1 trillion. Three consecutive quarters of growth in net interest margin, which reached 2.08% in the third quarter—indicate that the business is reaping the rewards of rising rates.
Source: Yahoo Finance