Warren Buffett Is Selling Bank of America Stock and Buying This High-Yield Investment Instead

Warren Buffett is one of the most widely respected investors in the world. And there's a good reason. With nearly 70 years investing in the public eye, he's produced incredible returns for anyone willing to invest alongside him. He recently saw the value of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) surpass $1 trillion. It's come a long way from the $22 million company Buffett took over in 1965, largely on the back of Buffett's investment prowess.

Today Buffett and his fellow investment managers oversee about $600 billion in investable assets for Berkshire Hathaway shareholders. And when Buffett makes a move in Berkshire's portfolio, the entire investing world pays attention.

The Oracle of Omaha's most recent move is to sell off a portion of Berkshire's investment in Bank of America (NYSE: BAC). The bank stock was once Berkshire's second-largest position after Apple (NASDAQ: AAPL), but Buffett is selling it and likely buying this high-yield investment instead.

Buffett's taking cash out of the bank

Investors typically have to wait until institutional investors like Berkshire Hathaway file form 13F with the Securities and Exchange Commission (SEC) to see what changes they made in their portfolios during the previous quarter. But since Berkshire Hathaway owns more than 10% of Bank of America's outstanding shares, it's required to report any changes in its ownership within three business days. That's how we know Buffett sold over $9.6 billion worth of Bank of America stock during the third quarter and an additional $140 million in the first two days of October.

Bank of America is far from the only company Buffett's been cutting down on. He sold over half of Berkshire's position in Apple between Q4 of 2023 and Q2 of this year. While Apple remains Berkshire's largest position, the sales in Q2 represent the largest in Berkshire's history.

In fact, Buffett's been a net seller of stocks for seven consecutive quarters beginning with Q4 2022. Considering the size of his Bank of America stock sale, Berkshire will likely confirm an eighth-straight quarter when it reports its earnings next month.

There's a simple explanation for why Buffett has felt compelled to sell off significant portions of Berkshire's largest holdings: taxes and valuation.

Buffett expects the current tax rate on corporate earnings to move higher after the current tax laws expire in 2025. They could revert to 35% from the current 21% rate if nothing happens. Kamala Harris has proposed a 28% corporate tax rate. Donald Trump would likely push for a continuation of the 21% rate instituted under his previous administration. But given the current government deficit, Buffett sees the current rate as unsustainable.