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Bank of America Was Warren Buffett's Favorite Stock Last Quarter

Warren Buffett (Trades, Portfolio)'s investment vehicle, Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B), filed its 13-F report with the Securities and Exchange Commission yesterday.

Published once a quarter, 13Fs are mandatory for any hedge fund managing more than $100 million in assets. The reports give us an interesting snapshot into the funds' portfolios at the end of each calendar quarter.

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The report must be filed within 45 days of the end of the quarter, but includes only equity positions. It does not detail debt positions, cash or other assets such as real estate or credit default swaps.

These reports provide us only with a limited amount of detail and should not be used for trading purposes.

Portfolio changes

According to Berkshire's report, the Oracle of Omaha and his team didn't do much trading during the second quarter of 2019.

After a relatively busy first quarter, when the investment firm bulked up its positions in JPMorgan Chase (NYSE:JPM), Delta Airlines (NYSE:DAL), PNC Financial Services (NYSE:PNC) and Red Hat (NYSE:RHT), as well as initiated a position in Amazon (NASDAQ:AMZN), Berkshire made only a few relatively insignificant changes to its portfolio in the second quarter of the year.

The biggest and possibly most notable change was an increase in its position in Amazon. Berkshire increased its position by 11.2%, or 54,000 shares, making the overall holding worth just over $1 billion.

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While this might be a substantial position for many hedge funds, for Berkshire Hathaway it is just 0.5% of the overall investment portfolio.

Bank holdings

Berkshire's decision to boost its Amazon holding has attracted the most media attention, but a more significant change to the portfolio is the decision to increase its stake in Bank of America (BAC). According to the 13F, during the second quarter of the year, Berkshire increased its position in Bank of America by around 30 million shares, or 3.5%.

We know that Buffett has continued to increase his position in the bank since the end of the quarter.

According to a regulatory filing dated July 25, Berkshire has increased the number of shares it owns in Bank of America to more than 950 million, crossing the 10% ownership threshold. This makes the bank the second-largest position in the portfolio by far, worth approximately $28 billion.

Considering that Bank of America was one of only four companies that Berkshire was buying last quarter, it appears as if Buffett believes that this is one of the most undervalued companies on the market at present.

Due to its size, we can assume that Buffett is calling the shots with Bank of America, unlike Berkshire's Amazon position, which he has openly declared was made by one of his investing lieutenants.

Buffett buying

Another position the Oracle undoubtedly instructed during the second quarter was an increase in Berkshire's investment in US Bancorp (NYSE:USB).

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At the end of July 2019, the conglomerate owned 132.5 million shares of the banking group. The position accounted for 3.3% of Berkshire's equity portfolio and was worth just under $7 billion at the end of the reporting period. Between the end of March and end of June, the conglomerate acquired an additional 3.2 million shares in US Bancorp, increasing its position by 2.4% overall.

Equity sales

Positions that Berkshire exited in the quarter include USG Corp., which was acquired by Knauf KG at the end of April. Before the deal closed, Berkshire owned around 39 million shares. The group reduced its holdings of Charter Communications (NASDAQ:CHTR) by around 5% or 284,000 shares. The position now makes up 1.03% of the overall equity portfolio at Berkshire.

Disclosure: The author owns shares in Berkshire Hathaway.

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This article first appeared on GuruFocus.