BAC-WT - Bank of America Warrants

[bennycx]

And ...guess what.. more shares bought. 1.02bil now

[sleepydragon]

1 billion shares of BAC and 2 billion shares of AAPL.

Easy to do mental math

[gfp]

1 billion shares of BAC and 2 billion shares of AAPL.

Easy to do mental math

 

I think Berkshire will own about the same number of Apple shares as BAC shares.  Why do you think Berkshire will own 2 Billion AAPL shares following the split?

[gfp]

Not sure if I should put this in the Berkshire section or the BAC section -

 

"Warren Buffett’s Berkshire Hathaway, which has been steadily increasing its stake in Bank of America (ticker BAC) recently, can hold as much as 24.9% of the bank’s stock, according to a banking regulator.

 

Investors like Berkshire are usually limited to a 10% stake in a bank. But Berkshire asked and received permission from the Federal Reserve Bank of Richmond in April to go over that threshold.

 

A spokesman at the Richmond Fed said that Berkshire can now go as high as 24.9%. That upper limit has not been previously reported.

 

It means that Berkshire can continue buying a lot more Bank of America stock if CEO Buffett chooses to do so."

 

https://www.barrons.com/articles/warren-buffetts-berkshire-can-acquire-nearly-a-25-of-bank-of-america-51596231422

[sleepydragon]

1 billion shares of BAC and 2 billion shares of AAPL.

Easy to do mental math

 

I think Berkshire will own about the same number of Apple shares as BAC shares.  Why do you think Berkshire will own 2 Billion AAPL shares following the split?

 

Oops, sorry that was a typo.

I meant 1 billion shares for AAPL

[CorpRaider]

Are you all seeing $2.15 for consensus EPS estimates for 2021?  I am thinking about doing a little post on why Buffett might be buying this versus WFC.

[changegonnacome]

Are you all seeing $2.15 for consensus EPS estimates for 2021?  I am thinking about doing a little post on why Buffett might be buying this versus WFC.

 

Hey would love to see your thoughts.

 

In my model I have long run fair play of WFC at almost a double todays prices (but obviously alot of execution risk and chance it takes way longer than my prediction to get expenses, tech overhaul & asset cap taken care of.......I feel thats the risk in WFC.........time.......long enough and the return rate will mirror BAC but you took on more risk that Scharf doesn't get it done. He comes with stellar rep from JPM & Visa (BNY too short time) but in both cases think he was working in a franchise with tailwinds and executed well - WFC is a turnaround plain and simple...it takes stomach, resilience & focus over a long period of time. Not sure Scharf has been battle tested in that sense - lets see.

 

Like lots of things with Buffet - think he's see BAC vs. WFC as a better risk adjusted return.....btw see BAC as a 50% upside over the same  time horizon c. 3yrs

[CorpRaider]

I wasn't going to do anything fancy, just looking at EPS earnings yields on consensus 2022 estimates.  I get too bulled up and can become really anchored if I put in too much elbow grease on a name. 

 

I see like an 11% figure for BAC and approaching 14.70% for WFC (the WFC estimates don't seem to have anything heroic, just a return to like $4 which was kind of run-rate for the past 4 years...which have not been the greatest).

 

I think I end up the same place as you.  The potential returns are lower with BAC, but the probabilities of achieving those returns are a lot higher. 

 

The other possible explanation that I've considered is that he just likes the sector a lot at these prices (I think that is a pretty well supported by his overall portfolio and moves the last several years) and if he's going to be seen to be endorsing management/performance by making the big deal of going above the 10% threshold. He probably doesn't want to come in for a ton more WFC questions without a huge delta in the potential rewards. 

 

I dunno if there's enough for a post, maybe if I throw in some other good N.A. banks like USB and TD.

 

[Mephistopheles]

He probably doesn't want to come in for a ton more WFC questions without a huge delta in the potential rewards. 

 

 

I speculate that the reason he sold off the amount of WFC he did was to take tax losses with plans to redistribute into BAC up to the new 24.9% threshold. The reward potential is worse for BAC but at least he gets the tax benefit from losses. He's probably not bearish on WFC at its current risk/reward. This also explains why Munger hasn't sold out his really low cost, $8.xx position at DJCO.

 

Now watch Buffett blow out of the entire WFC and I am proven wrong.

[thepupil]

He probably doesn't want to come in for a ton more WFC questions without a huge delta in the potential rewards. 

 

 

I speculate that the reason he sold off the amount of WFC he did was to take tax losses with plans to redistribute into BAC up to the new 24.9% threshold. The reward potential is worse for BAC but at least he gets the tax benefit from losses. He's probably not bearish on WFC at its current risk/reward. This also explains why Munger hasn't sold out his really low cost, $8.xx position at DJCO.

 

Now watch Buffett blow out of the entire WFC and I am proven wrong.

 

I agree that selling high cost tax lots could be a motivation, not THE motivation but certainly a factor.

 

 

[valueinvesting101]

It has been 3 working days since the last filing. Price level is still the same. Another 15-20 million share purchases in last 3 days?

[gfp]

It has been 3 working days since last filing. Price level is still the same. Another 15-20 million share purchases in last 3 days?

 

Knowing Berkshire it won't be filed until like 8:20pm eastern time - they don't like to mess around with early filings

[OracleofCarolina]

Here it is

[gfp]

"Accepted

2020-08-04 20:59:51"

 

I swear they try to go for last filing of the day on stuff like this

[LC]

Who is selling I wonder

[UK]

https://time.com/5875457/bank-of-america-brian-moynihan-economy-coronavirus/

[fareastwarriors]

Bank of America sees net interest income stabilizing by end of the year: CEO

 

 

https://www.reuters.com/article/us-bank-of-america-conference/bank-of-america-sees-net-interest-income-stabilizing-by-end-of-the-year-ceo-idUSKBN2662V7

 

presentation

http://investor.bankofamerica.com/static-files/4bbe1c1b-b00f-4a05-a513-9f57d97a07fa

[LearningMachine]

Did anyone else notice there was no SEC filing by Berkshire Hathaway today on any more BAC purchases even though BAC has been trading at a lower price over the last three days compared to BRK's earlier purchases?

 

Is it possible Buffett changed his mind?  There hasn't been much more information available since his purchases earlier.  Could he be thinking he could get better prices as uncertainty due to potentially non-peaceful transfer of power goes up?

[fareastwarriors]

Fed to allow big banks to resume share buybacks, with limitations

 

https://www.cnbc.com/2020/12/18/fed-to-allow-big-banks-to-resume-share-buybacks-with-limitations.html

[dutchman]

For those who own this, are you getting nervous about the valuation?  are we in a new world now where it deserves a market multiple?!  Don't know if  i should be selling here.

[LearningMachine]

For those who own this, are you getting nervous about the valuation?  are we in a new world now where it deserves a market multiple?!  Don't know if  i should be selling here.

 

Keep it if you believe money supply is indeed going up and there is probability that inflation/interest rates will show up sometime.  This is your insurance for that probability.

 

If you listen to their investor calls, they have been soaking up the extra money supply with increased deposits, and waiting to invest it when interest rates go up.  For what they do invest, they are sticking to high FICO consumers, short-term government guaranteed securities, and staying away from CRE.  Shows lower-income in the short-term but gives shareholders protection against adverse events.  Almost opposite of what some companies do.  Feels like Brian Moynihan is getting trained by GOAT.

 

I'd say keep it at least until we hit high interest rates from a historical perspective, and the income from that is showing through, and the multiple is still high on that high income, which might keep you waiting forever.

[KCLarkin]

For those who own this, are you getting nervous about the valuation?

 

Disclosure: I haven't owned BAC for several years. But here are my contradictory thoughts:

 

1. Momentum is real. It is generally better to hold past the point where value investors get nervous.

2. Banks (at least since 2008) give you ample opportunities to re-enter at attractive prices.

[Pelagic]

For those who own this, are you getting nervous about the valuation?  are we in a new world now where it deserves a market multiple?!  Don't know if  i should be selling here.

 

I've sold covered calls against about 1/3 of my position, might add some more up to about half of my shares. Targeting mid 40s cc with June or July expiration.

[omagh]

For those who own this, are you getting nervous about the valuation?  are we in a new world now where it deserves a market multiple?!  Don't know if  i should be selling here.

Last time that I checked, baby boomers were no longer the largest generation.  Household formation and a large number of citizens in the age 25-34 demographic continue to be strong from a housing and mortgage generation perspective.  Prior to the pandemic, BAC was generating about 20% free cash. During the pandemic year, free cash generation slipped down to 14%.  In the past 5 years, they've bought back almost 20% of shares outstanding and had capacity to do so during 2020, but were prevented from doing so by the regulator.  The regulator has lifted that restriction and so share retirement should continue as long as share prices remain attractive.  US banks are undervalued compared to Canadian banks and overall have less risk.  US banks are modestly leveraged at ~10x and well-reserved for significant risks.  Given the passage of time since the 2008 financial crisis, we may see some loosening of regulatory constraints and better methods of offloading risk.

 

I added during March 2020 to my BAC holdings and sleep well.  The original warrant trade was fantastic and there's no need to interrupt future compounding with Moynihan directing the ship.

[FCharlie]

For those who own this, are you getting nervous about the valuation?

 

Disclosure: I haven't owned BAC for several years. But here are my contradictory thoughts:

 

1. Momentum is real. It is generally better to hold past the point where value investors get nervous.

2. Banks (at least since 2008) give you ample opportunities to re-enter at attractive prices.

 

I agree with KCLarkin. Momentum is in favor of BAC and there's no real reason for it to stop here. There have been nine positive earnings revisions since January and I'm expecting even more positive earnings revisions in the future. I think the loan loss allowance is too high and reserves will need to be released. I wouldn't be surprised if today's price ends up being only about 12 times 2022 earnings. Hardly overvalued for where we are in the cycle.