Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) sold off nearly 52.8 million shares in Bank of America (NYSE: BAC), its second-largest holding, over the course of six days in late July. The stake amounted to around $2.3 billion, and it is the first time Berkshire has trimmed its position in the second-largest U.S. bank since 2019.

Bank of America (BofA) stock has performed well since Berkshire first invested in it in 2011, returning around 12% compounded annually. At the end of the second quarter, BofA made up around 11% of Berkshire's total portfolio. Should investors be concerned about its repeat selling?

In brief, banks borrow money in the short term (in the form of customer deposits) and lend it over the long term. They earn money on the difference between the interest they get from loans or other investments and the interest they pay on deposits. As a result, banks are cyclical stocks sensitive to fluctuations in interest rates.

Continue reading

Source Fool.com