By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel is divided on whether Berkshire Hathaway will fully divest from Bank of America (BAC). While some argue that the selling began under Buffett and could be routine rebalancing, others suggest that rising regulatory costs and potential risks in BAC's commercial real estate portfolio may signal a more significant shift.
Risk: Structural lowering of future ROE due to Basel III Endgame regulations and potential sharp compression of coverage ratios in BAC's commercial real estate portfolio.
Opportunity: Potential rebalancing of Berkshire's portfolio towards higher-return investments.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Warren Buffett retired as CEO on Dec. 31 and handed Berkshire Hathaway's proverbial keys to longtime understudy, Greg Abel.
In Buffett's and Abel's respective letters to shareholders, neither listed this former No. 2 position as an indefinite holding or one that "will compound over decades."
Additionally, this brand-name company isn't the screaming bargain it once was -- and that could be a big problem for the value-focused Abel.
It's a new era for Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB). After spending more than half a century leading Berkshire and seeing it grow into a trillion-dollar company, Warren Buffett hung up his work coat for the final time as CEO on Dec. 31.
The Oracle of Omaha's successor is his longtime understudy, Greg Abel, who's been with the company for over a quarter century. Although Buffett remains chairman of Berkshire's board, it's Abel who now has the final say on the company's day-to-day operations and its closely watched, 48-stock investment portfolio.
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In many respects, Buffett and Abel are cut from the same cloth. They're value investors above all else, and tend to focus on companies with strong management teams, easily identifiable competitive advantages, and robust capital-return programs.
But this isn't Warren Buffett's Berkshire anymore, and changes should be expected under new leadership. Arguably, the most eye-popping change is the possibility that Abel will dump the Oracle of Omaha's former No. 2 holding, Bank of America (NYSE: BAC). Although Form 13Fs will tell the tale, there are several signs and hints to suggest that BofA is getting the heave-ho.
In early 2024, when Berkshire's now-retired billionaire boss released his 2023 annual letter to shareholders, he outlined eight holdings he viewed as "indefinite."
As you might expect, Buffett pointed to Coca-Cola (NYSE: KO) and American Express (NYSE: AXP) as untouchable. These are the two longest-tenured holdings -- Coca-Cola since 1988 and Amex since 1991 -- and are generating annual yields on cost of 63% and 45%, respectively.
Buffett also highlighted integrated oil and gas company Occidental Petroleum as an indefinite holding. Despite having an on-again, off-again relationship with energy stocks since this century began, Berkshire's former boss strongly believes in Occidental's long-term success.
The sogo shosha (Japan's five trading houses) were the final five companies Buffett outlined as forever-type holdings. This includes Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo. Abel played an integral role in establishing and building up Berkshire's stakes in the sogo shosha.
In late February, Greg Abel released his first letter to shareholders as Berkshire's CEO, and added two new names to the list of companies he believes "will compound over decades." These two stocks are Apple and Moody's.
Seven of Berkshire's 10-largest holdings were labeled as indefinite or compound-type investments by Warren Buffett or Greg Abel. Bank of America was missing from both lists, signaling it's not viewed as a forever holding.
The next clue that BofA may be sent to the chopping block by Buffett's successor can be seen in Berkshire's 13Fs.
A Form 13F is a required quarterly filing by institutional investors with at least $100 million in assets under management. These filings allow investors to track which stocks and exchange-traded funds Wall Street's brightest money managers have been buying and selling.
According to Berkshire's 13Fs, Warren Buffett was a persistent seller of Bank of America stock for six consecutive quarters leading up to his retirement. Here's the breakdown:
Q3 2024:235,168,699 shares soldQ4 2024:117,449,720 shares soldQ1 2025:48,660,056 shares soldQ2 2025:26,306,156 shares soldQ3 2025:37,197,363 shares soldQ4 2025:50,774,078 shares sold
Between July 17, 2024, and Dec. 31, 2025, Buffett reduced his company's stake in BofA by nearly 515.6 million shares, or roughly 50%. The more than 1.03 billion shares previously held made Bank of America Berkshire's No. 2 holding behind Apple.
Greg Abel and Buffett are similar in their approaches to paring down large positions. Halving a 1.03-billion-share position in 18 months strongly suggests that Bank of America is no longer viewed as a core holding, let alone a long-term one.
Last but not least, Bank of America stock is no longer the screaming bargain it once was.
The Oracle of Omaha initially took a position in BofA in August 2011, shortly after the worst of the financial crisis had passed. In exchange for $5 billion in capital to shore up Bank of America's balance sheet, Berkshire received $5 billion in BofA preferred stock, yielding 6% annually.
However, the crown jewel of this deal was the stock warrants Berkshire received. In the summer of 2017, Buffett exercised 700 million stock warrants at $7.14 per share, netting his company an instant $12 billion windfall.
Aside from Bank of America being a brand-name company with strong leadership, it was likely BofA's 62% discount to book value in August 2011 that enticed Buffett to act. However, when 2026 began, Bank of America shares were trading at a 43% premium to book value. While this isn't egregiously pricey for a money-center bank, it's also not a bargain amid a historically expensive stock market.
There may also have been concerns that BofA's interest income would disproportionately suffer during a Federal Reserve rate-easing cycle. While this rate-easing cycle has likely been thrown out the window, courtesy of the inflationary effects of the Iran war, BofA's heightened interest rate sensitivity can lead to knee-jerk reactions by its investors.
With Greg Abel unwilling to compromise when it comes to value, BofA's notable premium to book value may cement its eventual exit from Berkshire Hathaway's investment portfolio.
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Bank of America is an advertising partner of Motley Fool Money. American Express is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Moody's. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"Berkshire’s sale of BAC is a function of portfolio scale and capital efficiency requirements rather than a fundamental shift in the company's long-term investment philosophy."
The narrative that Greg Abel is 'dumping' Bank of America (BAC) to pivot away from Buffett's strategy is likely overblown. Berkshire’s divestment is fundamentally a capital allocation decision, not necessarily a vote against BAC’s quality. With Berkshire’s cash pile exceeding $300 billion, the opportunity cost of holding a massive, low-growth banking position at a 1.4x price-to-book ratio is significant. Abel is likely optimizing for higher internal rates of return (IRR) rather than abandoning the value thesis. The 'non-indefinite' status is a red herring; Berkshire’s massive scale necessitates selling large, liquid positions to fund acquisitions or buybacks, regardless of the underlying company's long-term viability.
The divestment could signal a structural concern regarding the long-term profitability of money-center banks in an era of persistent inflation and regulatory capital requirements, which might outweigh simple portfolio optimization.
"Berkshire's BAC sales are standard trimming of a massive legacy position, not a prelude to full exit under Abel."
The article's thesis that Abel will fully exit Bank of America (BAC) overreaches: Buffett's six-quarter trim (515M shares sold, halving to ~515M) predates Abel's CEO tenure and reflects routine concentration risk management for Berkshire's $100B+ position, not rejection. BAC's absence from 'indefinite' lists isn't damning—only 9 of 48 holdings got that nod—while its 43% book premium (modest for a top-tier bank with 11x forward P/E, 2.8% dividend yield, 11% ROE) aligns with value discipline amid $330B cash hoard. Watch Q1 2026 13F for Abel's first moves; fundamentals (net interest income up 3% YoY Q4 2025) support holding.
If Abel mirrors Buffett's Apple conviction by explicitly endorsing BAC but still trims further for tax efficiency or diversification, the article's dump narrative unravels; BAC's rate sensitivity could shine in a higher-for-longer environment post-Iran tensions.
"The article mistakes a methodical 50% reduction for an imminent full exit, when the real test is whether Abel's Q1 2026 13F shows acceleration of selling or stabilization of the remaining $20B stake."
The article conflates three separate signals—absence from 'forever' lists, six quarters of selling, and valuation—into a predetermined conclusion that Abel will dump BofA. But the selling began under Buffett, not Abel. A 50% reduction over 18 months could signal rebalancing, not exit; Berkshire still holds ~515M shares worth ~$20B. The valuation argument is weakest: 43% premium to book for a money-center bank with 12%+ ROE isn't expensive relative to peers. The article ignores that Abel co-built the sogo shosha positions—suggesting patience with multi-year theses, not hair-trigger selling. Missing: BofA's dividend yield (~2.8%), capital return trajectory, and whether Abel's first moves as CEO will actually confirm or contradict this narrative.
If Abel is truly a value purist like Buffett, he inherited a position that no longer meets Buffett's own 62%-discount-to-book entry criteria—and the six-quarter sell-off shows Buffett himself was already exiting. Continuing to hold at a premium contradicts the stated philosophy.
"Any BAC trimming is more likely portfolio rebalancing and capital redeployment than a proven shift away from Berkshire's value-investing framework."
The article leans into a narrative that Greg Abel will dump Bank of America from Berkshire Hathaway, but several holes exist. 13F data only captures public, long-only equity stakes and lags reality; Berkshire’s true exposure includes Apple’s dominant weight and non-public positions. The ‘forever’ holdings idea is a philosophy, not a rigid rule, and Abel’s addition of Apple and Moody’s to the indefinite list could simply reflect a broader rebalancing. A BAC sale could be opportunistic, funded by excess capital or higher-return bets, rather than a tectonic shift away from a value-focused framework. The core driver for Berkshire remains cash generation and capital allocation discipline, not one bank stock’s fate.
The strongest counter is that a sustained, multi-quarter trimming of BAC could signal a meaningful strategic pivot, potentially leaving Berkshire more exposed to Apple and AI-related bets and less diversification in a credit/DEFLATION-sensitive franchise.
"The divestment from BAC is likely a response to structural regulatory headwinds that diminish long-term ROE, not just routine capital allocation."
Grok, your reliance on Q1 2026 13F data is problematic; we are currently in 2024. More importantly, everyone is ignoring the regulatory 'Basel III Endgame' impact. If Abel is trimming, it isn't just about IRR; it’s about the rising cost of capital for G-SIBs (Global Systemically Important Banks). BAC’s capital requirements are tightening, which structurally lowers the ceiling on future ROE. This isn't just portfolio rebalancing—it's a defensive retreat from a sector facing permanent margin compression.
"Basel III fears are overblown and priced in; BAC trims reflect yield chasing, with CRE as the overlooked risk."
Gemini, Basel III Endgame talks concluded with banks like BAC securing milder 10-15% capital hikes (vs. 20% proposal), already baked into CET1 ratios (11.8% Q4). Abel's trims mirror Buffett's T-bill rotation for yield, not panic—Berkshire's cash earned 5% vs. BAC's 11% ROE. Unmentioned risk: BAC's $110B CRE portfolio (3.5% loans) faces office defaults, but 200% coverage ratios mitigate near-term hits.
"CRE coverage ratios mask timing risk; if losses accelerate, BAC's risk-adjusted returns may already be below Berkshire's 5% cash yield."
Grok's CRE mitigation argument (200% coverage) assumes loss severity stays contained, but office defaults are front-loaded in 2024-2025 cycles. The real risk: if 10-15% of that $110B portfolio realizes losses faster than modeled, coverage ratios compress sharply. Basel III Endgame's 'milder' outcome still means BAC's ROE ceiling drops structurally—Gemini's point holds. Buffett's T-bill rotation makes sense only if BAC's risk-adjusted returns fall below 5%, which Grok hasn't addressed.
"Basel Endgame may constrain returns, but it's not a binary doom; BAC's ROE is sensitive to rate and default dynamics and Berkshire's trim may reflect cash opportunity cost rather than a definitive exit bet."
Gemini's Basel Endgame emphasis is helpful, but it risks turning a capital constraint into a permanent ceiling on BAC's returns. Even with tighter CET1, ROE is not doomed if net interest income, credit quality, and fee income adjust with rates. Berkshire trimming BAC could reflect opportunity cost of cash or a calculated shift toward higher-IRR bets, not a definitive judgment on BAC's long-run profitability. The focus should be on ROE sensitivity across rate and default scenarios.
The panel is divided on whether Berkshire Hathaway will fully divest from Bank of America (BAC). While some argue that the selling began under Buffett and could be routine rebalancing, others suggest that rising regulatory costs and potential risks in BAC's commercial real estate portfolio may signal a more significant shift.
Potential rebalancing of Berkshire's portfolio towards higher-return investments.
Structural lowering of future ROE due to Basel III Endgame regulations and potential sharp compression of coverage ratios in BAC's commercial real estate portfolio.