The shadow of the new epidemic still hangs over the United States. But yesterday (July 23rd, 2020), SEC filing showed that the “God of stocks” Warren Buffett bought $800 million of Bank of America. According to the documents of the securities and Exchange Commission, Berkshire Hathaway, an investment company of Mr. Buffett, bought 33.9 million shares of Bank of America at an average price of $24 per share from July 20 to 22, with a value of $813.3 million. The shareholding ratio increased from 3.6% to 11.3%, and the market value of the shares exceeded $24 billion. Will bank of America be the ultimate tips given by the God of stocks in this stock disaster?
- The Actions Buffett This Year
So far this year, Mr. Buffett’s operations have been dazzling.
1). Buy and Sell Airline Stocks
He first add positions in airplane stocks and than cut loss by selling all of them. As we know, at the end of February, Mr. Buffett increased his position by 1 million shares of Delta Airlines, and then sold another 13 million shares at the end of March. According to the U.S. stock market this month’s slump and Delta Air’s slump, the God of stocks is no doubt has stop loss to go in time.
2). Buy and Sell New York Mellon Bank Stocks
On March 3, Warren Buffett increased its holdings in Bank of New York Mellon, with a shareholding ratio of more than 10%. On April 7, the God of stocks sold off the Bank of New York Mellon stock; on April 15, the God of shares increased its holdings in United States bank, with a shareholding ratio of more than 10%.
3). Buy Back Berkshire Hathaway Stocks
After adding and reducing positions twice, the God of stocks began to buy back. According to SEC filings in early July, Berkshire Hathaway may have bought back $5 billion to $5.5 billion in shares. (this involves a calculation of 15.54% ownership of the company as reported by Mr. Buffett in the paper and a comparison with the outstanding shares of Berkshire Hathaway, which was reported on March 31.) But it is not clear whether it will disclose the size of the share buyback until it releases its second quarter results in August.
Mr. Buffett seems to think that the impact of the new epidemic on the economy may be narrowed, and the worst outcome he mentioned at the annual meeting on May 2 is unlikely to happen in his recent view.
2. During the 1997 financial crisis, the God of stocks repeatedly bought financial stocks
1). Bought Wells Fargo
During the Asian financial crisis, Berkshire’s heavy positions were mainly distributed in finance, daily consumption and optional consumption industries. In 1998, Berkshire significantly increased its holdings in the consumer and financial sectors, in financial shares of Wells Fargo, optional consumer stocks of Disney, and daily consumer stocks of Gillette, by 89.48%, 57.89% and 50.00% respectively.
2). Bought American Expres in 2000 tech bubble
After the accumulation of technology in the 1980s, the American information technology industry began to develop rapidly in the 1990s. The emergence of PC brings the rapid popularization of Internet. With the rise of the wave of science and technology, from the beginning of 1995 to march of 2002, the NASDAQ index once reached a historical high of 5048.62 from 743.58, an increase of 578.96%. But soon the technology bubble burst, and in the next 30 months, the NASDAQ index plummeted 77.93%, a six year low. In 2001, Buffett sharply increased the number of American Express shares, from 50 million shares in 1999 to 152 million shares in 2001. Looking back at the up and down of this wave, Buffett is still the biggest winner.
3). Bought Goldman Sachs in 2008 global financial crisis
In March 2007, new century finance company, the second largest subprime mortgage company in the United States, announced that it was on the verge of bankruptcy, and was subsequently terminated by the New York Stock Exchange. In April, the company filed for bankruptcy, marking the formal outbreak of the subprime crisis. After the subprime mortgage crisis further escalated, financial institutions began to sell assets in order to meet the requirements of capital adequacy ratio and risk control. With the bankruptcy of American housing mortgage loan company, the bankruptcy of national financial corporation, the largest commercial mortgage supplier in the United States, and the collapse of Lehman Brothers bank, the subprime mortgage crisis quickly turned into a global financial crisis. The crazy selling tide of the stock market, the stock markets of many countries have fallen sharply, and the market value of listed companies has shrunk.
During the period, Buffett has invested in Goldman Sachs and other major companies such as General Electric who were in trouble. Berkshire Hathaway lent $3 billion to general electric and injected $5 billion into Goldman Sachs. By 2009, U.S. stocks began to rebound, and the value of Buffett’s investment in Goldman Sachs and general electric thus doubled.
3. Bank of America beat expectations in the second quarter
Although the net profit cut, but the Bank of America’s financial indicators exceeded market expectations. On Thursday, July 16, Bank of America released its second quarter results. According to the financial report, Bank of America’s second quarter profit fell 52% year-on-year, to 3.53 billion US dollars from 7.35 billion US dollars in the same period of last year, but still higher than the market forecast of 2.37 billion US dollars. In terms of provision for bad debts, Bank of America made a provision for bad debts of US $4 billion in the second quarter, and its accumulated provision for bad debts has reached a record high of US $21 billion. Bank of America reported revenue of $22.3 billion in the second quarter, exceeding the previous market estimate of $22 billion. Bank of America’s earnings per share reached 37 cents, 74 cents a year earlier, exceeding market expectations of 25 cents. In addition, Bank of America’s investment banking business performed well in the second quarter, achieving $2.2 billion in revenue, a 57% surge. This is mainly because during the epidemic period, a large number of enterprises, forced by capital pressure, improved their balance sheets by issuing shares and bonds.
To sum up, in this crisis, the tips God of stocks has given maybe is Bank of America.
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