Buffett's Berkshire adds to Bank of America stake, now valued at $27 billion

Julia La Roche

Berkshire Hathaway (BRK-A, BRK-B) massively upped his stake in Bank of America (BAC) during the second quarter, according to a 13-F regulatory filing posted on Wednesday.

During the quarter, Berkshire picked up 31.08 million shares of Bank of America to last hold 927.24 million shares, a position valued at $26.89 billion at the end of the period. The Bank of America stake is Berkshire’s second biggest equity holding behind Apple (AAPL), the filing shows.

Bank of America’s stock price ended the second quarter at $29.01. The stock has slipped to last trade around $26.50 in the pre-market on Thursday.

Buffett invested in Bank of America as it dealt with legal troubles in 2011 related to mortgages. At the time, Bank of America was facing massive legal fines and settlements related to mortgage-backed securities and mortgages. Most were related to Countrywide Financial, which Bank of America bought in 2008.

That summer, Buffett called Bank of America CEO Brian Moynihan and let him know that the wanted to invest.

FILE - In this May 5, 2019, file photo Warren Buffett, Chairman and CEO of Berkshire Hathaway, speaks during a game of bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb. Berkshire Hathaway Inc. reports earnings on Saturday, Aug. 3. (AP Photo/Nati Harnik, File)

On August 25, 2011, the bank announced that Buffett snapped up $5 billion worth of its preferred stock that paid a 6% annual dividend. In other words, Bank of America would pay Buffett $300 million annually. This investment also came with warrants allowing him to buy 700 million common shares at $7.14 per share any time before Sept. 2, 2021.

In his 2016 annual shareholder Buffett wrote that if Bank of America — which offered a dividend rate of $0.30 at the time — increased its dividend rate above $0.44 before 2021, he would likely make the exchange from preferred shares to common. During the summer of 2017, Bank of America announced plans to increase its quarterly dividend to $0.12 per common share, or $0.48 per share annually. And as expected, Buffett announced plans to exercise those warrants once the dividend rate increase took effect.

Upon exchanging the preferred for common shares, Berkshire Hathaway became Bank of America’s largest shareholder.

Berkshire's top holdings consist largely of financial stocks, including 409.8 shares of Wells Fargo (WFC), 132.5 million shares of U.S. Bancorp (USB), and 59.5 million shares of JPMorgan Chase (JPM). Berkshire added 3.15 million shares of U.S. Bancorp during the quarter.

Elsewhere, during the second quarter, Berkshire added to its relatively new position in Amazon (AMZN). During the quarter, the investor picked up 54,000 shares of the e-commerce giant, bringing the stake to 537,300 shares, valued at just over $1 billion at the end of the quarter.

Funds of a certain size are required to disclose long equity holdings in regulatory filings known as 13Fs. These filings are made public 45 days after the end of each quarter, so it’s likely that the positions may have changed in that time.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.