No. of Recommendations: 5
" Ajit Jain's big sale of Berkshire stock prompts speculation
Ajit Jain's sale this week of almost half his stake in Berkshire Hathaway has one analyst suggesting Warren Buffett's 73-year-old insurance chief may be preparing for his exit.
CFRA Research's Cathy Seifert tells Reuters, "Those of us who have watched Berkshire Hathaway for a long time have suspected there may be a changing of the guard in insurance operations. My sense is that he may be moving on, and I suspect that is behind his stock sales."
An SEC filing on Wednesday disclosed Jain sold 200 Class A shares for $139 million.
He retains 61 Class A shares and 466 Class B shares, which currently have a market value of $41.2 million.
Family trusts and a non-profit foundation have another $126.2 million in Class A and Class B shares.
The average price for the September 9 sale of the 200 Class A shares was $695,418 per share. It came four sessions after BRKA closed at an all-time high of $715,910.
The stock price has continued to fall, ending today at $671,750.
That timing has some Berkshire watchers thinking the sale is more about the stock price than Jain's future employment plans.
David Kass, a finance professor at the University of Maryland, is quoted by CNBC.com as saying, "This appears to be a signal that Ajit views Berkshire as being fully valued."
And Glenview Trust CIO Bill Stone says, "I think at best it is a sign that the stock is not cheap. At over 1.6 times book value, it is probably around Buffett’s conservative estimate of intrinsic value. I don’t expect many, if any, stock repurchases from Berkshire around these levels."
Jain, a 40-year Berkshire veteran, has generated many billions of dollars in profits for the company's insurance operations, prompting Buffett to tell shareholders in 2011 that he couldn't "think of any decision [Jain has] ever made that I think I could have made better..."
"My best deal was hiring him."
Bank of America's CEO isn't asking any questions ...
Bank of America CEO Brian Moynihan doesn't know why Warren Buffett's Berkshire Hathaway has reduced its stake in the bank by almost 17% since mid-July.
“I don’t know what exactly he’s doing, because frankly, we can’t ask him. We wouldn’t ask," he said at Barclays Global Financial Services Conference this week.
According to a FactSet transcript cited by CNBC.com, Moynihan added, "But on the other hand, the market’s absorbing the stock ... we’re buying a portion of the stock, and so life will go on."
Warren Buffett and Bank of America CEO Brian Moynihan answer students' questions at Georgetown University's McDonough School of Business in Washington on September 19, 2013. Photo: REUTERS | James Lawler Duggan
Referring to Berkshire's $5 billion investment in BofA in 2011 when it was being battered by subprime mortgage losses, Moynihan said, "He’s been a great investor for our company, and stabilized our company when we needed at the time."
As a result of that deal, Berkshire got 700 million BAC shares in 2017 for just $7.14 each. The stock closed today at $38.65.
"He just had the guts to do it in a big way. And he did it. And it’s been a fabulous return for him. We’re happy that he gets it."
... as Berkshire continues to sell BAC shares
Berkshire Hathaway brought in almost $229 million by unloading another 5.8 million shares of Bank of America on Friday of last week and Monday and Tuesday of this week.
It's the smallest three-day total so far.
The relatively slow pace of the sales may be the result of the bank's falling stock price.
It's down 12.4% since Berkshire started its selling spree on July 17.
The sales did extend the most recent selling streak to 12 consecutive sessions, matching the 12 straight days of selling in July.
Because Berkshire still owns more than 10% of BAC's outstanding shares, it has two business days to disclose any new stock moves.
The lack of a filing today indicates there was no selling on Wednesday, ending the streak.
In total, Berkshire has sold 174.7 million shares for $7.2 billion. That's an average price of $41.19.
As of Wednesday, it still owned 858.2 million shares, currently worth $33.2 billion. It is Berkshire's third largest equity position, after Apple and American Express.
It remains BofA's largest shareholder with an 11.1% stake."" The charts and graphs don't copy and paste.
