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Warren Buffett Is Selling Bank of America and Citigroup Stock and Is Piling Into This High-Yield Investment Instead
CCiti(C) The Motley Fool·2025-03-11 16:05

Core Insights - In 2024, Berkshire Hathaway set a record by paying over 166billionintaxes,thehighestamountanycompanyhaseverpaidtotheU.S.governmentinasingleyear,despitelowertaxratesinrecentyears[1]−Thesignificanttaxbillindicatessubstantialearnings,primarilyfromcapitalgainsonthesaleofpubliclytradedequities,with166 billion in taxes, the highest amount any company has ever paid to the U.S. government in a single year, despite lower tax rates in recent years [1] - The significant tax bill indicates substantial earnings, primarily from capital gains on the sale of publicly traded equities, with 143 billion worth of stock sold resulting in 101.1billionintaxablegains[2]InvestmentStrategy−Buffettsoldsignificantportionsoffinancialstocks,includingBankofAmericaandCitigroup,whilemaintainingalargepositioninApple,whichremainsthelargestholdingdespiteareductionofovertwo−thirdsofitsoriginalstake[4][5]−Thedecisiontosellfinancialstocksmaystemfromdissatisfactionwiththeirperformance,particularlyCitigroup,whichfacedregulatorychallengesandrestructuringefforts[8]TaxImplications−Thelowtaxrateof21101.1 billion in taxable gains [2] Investment Strategy - Buffett sold significant portions of financial stocks, including Bank of America and Citigroup, while maintaining a large position in Apple, which remains the largest holding despite a reduction of over two-thirds of its original stake [4][5] - The decision to sell financial stocks may stem from dissatisfaction with their performance, particularly Citigroup, which faced regulatory challenges and restructuring efforts [8] Tax Implications - The low tax rate of 21% on the 101 billion in gains in 2024 allowed Berkshire to retain more earnings compared to the previous rate of 35% before 2017, resulting in an additional 14billioninretainedcapital[9]PortfolioManagement−Asoftheendof2024,Berkshire′sportfoliowasvaluedat14 billion in retained capital [9] Portfolio Management - As of the end of 2024, Berkshire's portfolio was valued at 271.6 billion, with unrealized capital gains of 196billion,indicatingastrategyfocusedonsellinghigh−valuestockswhilewaitingforbetterinvestmentopportunities[10]−Thecompanyhasshifteditsfocustoshort−termU.S.Treasurybills,increasingholdingsbyover196 billion, indicating a strategy focused on selling high-value stocks while waiting for better investment opportunities [10] - The company has shifted its focus to short-term U.S. Treasury bills, increasing holdings by over 166 billion in 2024, as they provide safety and attractive yields, currently around 4.3% [13][12] Future Outlook - Buffett is likely to continue investing in Treasury bills in 2025 until more attractive opportunities in large-cap stocks arise, as the current market presents limited viable candidates for significant investments [15][14]