Billionaire Battleground Stock: Warren Buffett Dumps It, While Viking Global’s Ole Andreas Halvorsen Buys It Hand Over Fist

November had no shortage of big news headlines. The 2024 election results drove stocks to new highs; the companies’ earnings have overall come in better than expected; and the October inflation report didn’t bring up the two-year (and counting) bull market rally.

But among this sea of ​​data releases, investors may have overlooked what may be the most important of all: the November 14 deadline to file Form 13F with the Securities and Exchange Commission (SEC).

No later than 45 calendar days after the end of the quarter, institutional investors with at least $100 million in assets under management must file a 13F. This form provides a snapshot of which stocks Wall Street’s top money managers bought and sold in the most recent quarter (in this case, the quarter ending in September).

When it comes to billionaire investors, no one gets more attention than Berkshire Hathaway‘s (BRK.A 0.12%) (BRK.B -0.01%) aptly named “Oracle of Omaha,” Warren Buffett. When you oversee a cumulative return of more than 5,800,000% in your company’s A shares (BRK.A) since taking over as CEO nearly 60 years ago, you’re bound to gain a following.

However, no two billionaire money managers think (or invest) alike. For example, Warren Buffett’s favorite stock to buy during the third quarter, beloved consumer brand Domino’s Pizzawas dumped by eight other billionaire wealth managers.

It’s not uncommon for branded companies to become billionaire stocks on the battlefield – and that’s exactly what we’re witnessing right now with the money center financial institution Bank of America (BAC 0.02%). Where Buffett has not been able to press the sell button fast enough, billionaire Ole Andreas Halvorsen at Viking Global Investors has repeatedly pressed the buy button.

Warren Buffett is kicking more than a quarter of Berkshire’s BofA position to the curb

Although the Oracle of Omaha is an unabashed long-term optimist and has warned investors not to bet against America, what he does over shorter timelines doesn’t always match his long-term message.

For eight consecutive quarters, Buffett and his team have been decisive net sellers of $166.2 billion worth of stocks. While a significant portion of these sales can be attributed to top teams AppleForm 4 filings with the SEC show that Berkshire Hathaway has disposed of more than 266 million shares of Bank of America since July 17. This equates to around $10.5 billion in total revenue and a reduction of approx. 26% of Berkshire’s stake in one of America’s leading money center banks.

A potentially benign reason to sell more than a quarter of what had been Berkshire Hathaway’s No. 2-holding by market value, are tax consequences. Buffett said during Berkshire’s annual shareholder meeting in May that corporate taxes were likely to rise. He used this as a roundabout justification to lock in some gains at Apple. The idea is that taking gains at a favorable low tax rate would, in hindsight, be viewed favorably by Berkshire’s shareholders.

But there may be more to this selling activity than simple profit-taking or tax implications.

S&P 500 Shiller CAPE ratio data of YCharts.

For example, the stock market is historically expensive, and Buffett’s sustained selling for two years appears to be a clear attempt to build Berkshire Hathaway’s cash position in anticipation of an eventual stock decline. The “Buffett Indicator” hit an all-time high in November, while the S&P 500’s Shiller price-to-earnings (P/E), also known as the cyclically adjusted P/E ratio (CAPE ratio), is at its third-highest reading during a continuous bull market as tested for 153 years. It’s hard to get value at the moment.

To build on that point, Bank of America stock isn’t the screaming bargain it once was. When Buffett originally invested in BofA’s preferred stock in August 2011, Bank of America was trading at a paltry 38% of its book value (ie, a 62% discount to book value). At the closing bell on November 29, shares were valued at 34% premium at its listed book value.

The other possible concern for Warren Buffett and his top advisers, Ted Weschler and Todd Combs, is the prospect of falling interest rates. Bank of America is the most interest-sensitive of the US’s largest banks in terms of total assets. While the steepest rate hike cycle in four decades, from March 2022 to July 2023, added billions of dollars in net interest income to BofA’s bottom line, rate cuts are expected to have a negative impact on the company’s earnings per share (EPS).

Halvorsen’s Viking Global put close to $800 million to work at Bank of America

At the other end of the spectrum, billionaire Ole Andreas Halvorsen, who oversees more than $27 billion at Viking Global Investors, can’t stop buying shares in Bank of America.

Halvorsen and his advisors opened a position in BofA during the quarter that ended in September by buying 19,959,530 shares. On a cost basis, we are talking about an investment of around 800 million dollars, where Bank of America goes from not owned per 30 June to Viking Global’s 12th largest stock per 30 September. To be fair, Halvorsen is a big fan of financial stocks and has piled in recently Visa and US Bancorpalso.

The primary attraction of financial stocks is that they are cyclical. Although slowdowns and recessions are an inevitable part of the economic cycle, the non-linearity of this cycle works in favor of patient investors. Since growth periods last significantly longer than recessions, bank stocks like BofA are able to cautiously grow their loan portfolios over time, often increasing their book value in the process.

Halvorsen and his team are also likely optimistic about the Fed’s approach to the current rate easing cycle. Although lower interest rates are expected to have a negative impact on Bank of America’s interest income, it appears that the country’s central bank intends to slow down the rate-cutting process. The more telegraphed the Fed is with its monetary policy actions, the better BofA can position its loan portfolio to optimize interest income.

Also, don’t overlook the role Bank of America’s capital return program has played in increasing shareholder value. When the US economy is firing on all cylinders and BofA passes the Fed’s annual stress test, it is not uncommon for the company’s board to return more than $20 billion via dividends and buybacks to shareholders. Bank of America has reduced its number of shares outstanding by 27% over the past seven years, which has had a positive impact on the company’s EPS.

Bank of America has also done a phenomenal job of controlling its spending. An aggressive investment in digital banking allows the company to close or consolidate some of its brick-and-mortar branches. Over the last three-year period (ending September 30, 2024), the percentage of loan sales that were digitally enabled jumped from 43% to 54%.

Finally, there is a good chance that banking regulations will remain somewhat relaxed with the incoming Donald Trump administration, which is positive for BofA.

While Bank of America stock isn’t historically expensive like the broader market, it has a valuation — 13 times forward earnings — where upside could be modest over the next few years.