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Tags: BofA | Berkshire | Hathaway | holding

Motley Fool: BofA Could Become Berkshire Hathaway's Top Holding

By    |   Wednesday, 26 March 2014 04:29 PM

Bank of America could soon turn into the biggest stock holding of Berkshire Hathaway, led by legendary investor Warren Buffett, writes John Maxfield of The Motley Fool in USA Today.

In 2011, Berkshire invested $5 billion in Bank of America. It received that amount of preferred stock and warrants to buy 700 million shares of BofA common stock for $7.14 per share.

While the value of the preferred shares is essentially fixed, the surge of BofA shares to $17.22 as of Wednesday afternoon has more than doubled the value of the common-stock position.

Editor’s Note:
Retire 10 Years Earlier With These 4 Stocks

Berkshire's combined stake in Bank of America is worth about $17 billion.

For BofA to catch up to Wells Fargo in Berkshire's portfolio, BofA shares would need to rise by about $10 a share, assuming Wells Fargo stays steady.

Neither of those developments is a slam dunk. BofA shares already have jumped 40 percent over the last year.

But Wells Fargo stock stands at 1.6 times book value, about twice the level for Bank of America, Maxfield says. So he sees a chance for BofA to become Berkshire's No. 1 holding.

Morningstar analyst Jim Sinegal offers a mixed assessment of BofA. "Bank of America's collection of businesses, ranging from its massive deposit franchise to the 'thundering herd' of Merrill Lynch's brokers and wealth managers, is impressive on a qualitative basis, garnering the company a narrow economic moat," he writes on Morningstar.com.

"In our view, however, the struggles associated with integrating all of these businesses are not yet complete."

Editor’s Note:
Retire 10 Years Earlier With These 4 Stocks

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StreetTalk
Bank of America could soon turn into the biggest stock holding of Berkshire Hathaway, led by legendary investor Warren Buffett, writes John Maxfield of The Motley Fool in USA Today.
BofA,Berkshire,Hathaway,holding
272
2014-29-26
Wednesday, 26 March 2014 04:29 PM
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