Warren Buffett Dumps Nearly $10 Billion of 1 Key Stock and Buys $345 Million of His Favorite Stock. Here's What You Need to Know.

Core Viewpoint - Warren Buffett is reducing Berkshire Hathaway's stake in Bank of America, selling nearly $10 billion worth of shares, which is almost a quarter of its original investment, while simultaneously purchasing$345 million in another investment [1][2]. Group 1: Investment Actions - Berkshire Hathaway has sold almost 10 million shares of Bank of America, bringing its ownership just below 10%, which allows it to avoid timely reporting of future transactions [2]. - The recent sales enable Berkshire to reduce its stake without immediate market reactions, as future transactions will be reported quarterly [2]. - Despite the sales, Berkshire has also repurchased $3 billion of its own shares this year, indicating a strategy to reward shareholders and maintain financial health [7]. Group 2: Historical Context and Performance - Buffett's initial investment in Bank of America during the 2008 financial crisis involved a$5 billion infusion, which has since turned into over $40 billion, showcasing significant returns [3]. - The investment has yielded a paper profit of$12 billion from the exercise of warrants, reflecting the successful relationship between Buffett and Bank of America [3]. Group 3: Market Concerns - Buffett has expressed unease about the current market conditions, describing it as "casino-like" and warning of potential market panics [4]. - Specific concerns regarding the banking sector, particularly Bank of America, stem from the bank's large holdings of low-yield debt securities acquired before 2022, which are now underperforming due to rising interest rates [5][6]. - The fixed yields on these securities are causing a reduction in net interest income, a critical metric for banks, and could lead to unrecognized paper losses if the bank is forced to sell these securities [5][6].