Berkshire breaks out to record high with fourth-quarter rally reaching 19%

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Since the rally began with the start of the fourth quarter on October 1, the Class A shares have closed at record highs 11 times as they soared 19.1%.

The much more widely held B shares closed at new highs just 10 times but are also up 19.1% from their near-term low.

Berkshire’s B shares are now 7.5 percentage points ahead of the benchmark for the year so far.

We won’t know for sure until then, but numbers in the company’s third quarter 10-Q, released last Saturday, indicate Berkshire continued to reduce its Bank of America stake.

It would be the ninth consecutive quarter of selling.

As of June 30, Berkshire reported holding 483.4 million BAC shares valued now at $24.7 billion, it’s fifth largest equity position.

On June 30, 2024, before the selling began, Berkshire owned just over 1 billion shares valued at $41.1 billion.

Since then, the number of shares in the portfolio has decreased by 53.2%, not including any Q3 sales, while the stock price has increased by 28.3%.

If there had been no reductions, the position would be worth $52.7 billion.

The belief Berkshire sold more BAC shares in the third quarter is based on a $372 million reduction in the cost basis for equities categorized by the company as “banks, insurance, and finance.”

The 10-Q also reports $2.2 billion of pretax gains from equity sales.

Barron’s notes Bank of America and American Express are the only financial stocks in the portfolio that have a cost basis low enough to generate a gain like that. Amex is one of the four stocks new CEO Greg Abel indicated would be held for “decades” to come in his February letter to shareholders.

In any case, Berkshire’s almost 23% stake in Amex would have required it to quickly disclose any sales.

Based on the numbers in the 10-Q, the warrants Berkshire received as part of a 2011 $5 billion investment in the bank that it used in 2017 to buy 700 million shares at $7.14 each, and BAC’s average stock price in the quarter, Barron’s estimates 30 to 40 million shares may have been sold.

That would be roughly in line with the 30.2 million shares sold in the second quarter.

The case isn’t as good, but Barron’s…