Apparently, Warren Buffett sees something coming. Since mid-July, his company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has been dumping one of its largest holdings, Bank of America (NYSE: BAC), off-loading more than $7 billion worth of shares in just under two months. Why?

Buffett’s affinity for Bank of America seems to be waning

The megabank is a longtime favorite of Buffett and one of Berkshire’s largest holdings; for years, it occupied the No. 2 spot behind only Apple. He first purchased shares in 2007, just before the financial crisis of 2008.

Ouch! True to his philosophy, however, Buffett knew Bank of America was a good company and that it would recover.

Although he sold about half of his position after the crash, taking a hit of about $100 million, he invested a much larger $5 billion directly into the company a few years later to help bolster the struggling bank. In exchange, Berkshire received preferred shares and warrants to buy 700 million shares at just over $7 any time before 2021. Buffett saw that Bank of America was a solid profit-generating company and things would turn around.

And they did. He exercised the warrants six years later for a paper profit of $12 billion. Not a bad deal. Since then, he has been the biggest shareholder in Bank of America and has been a net buyer of the stock — until now. Why?

We can’t know for sure, unfortunately, but here’s a credible theory. Bank profits are cyclical and tend to outperform the market during times of expansion and underperform during slowdowns and recessions.

Considering the uncertain future of the U.S. economy, troubling economic signals like recent jobs reports, consumer credit at record levels, and the market showing “casino-like” qualities according to Buffett himself, Berkshire seems to be positioning itself defensively, rapidly increasing its cash reserves. And Bank of America is not the only stock it is selling.

Of course, it could be simple profit taking. Buffett might expect capital gains taxes to increase soon. It could be a mixture of all of the above.

One thing is for certain: There is one stock that Buffett consistently loves to buy and still does, despite being a net seller of assets for some time now.

Buffett believes in his company and its stock

It’s clear that one stock Buffett and his company believe in is their own. As of the last quarterly report, he repurchased $345 million worth of Berkshire shares, bringing 2024’s total purchases to nearly $3 billion. Since 2018, the company has bought back nearly $80 billion of its own shares. That indicates a strong belief in its future. It’s also how the company helps reward shareholders, increasing their stake in the company as the share count declines.

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Berkshire doesn’t offer a dividend. Instead, it helps boost its stock price by repurchasing shares even though it’s not obligated to. It happens when Buffett believes the stock is trading under its intrinsic value.

So if he’s buying back Berkshire shares, it has the implicit blessing of one of the best investors in history. Under his leadership, Berkshire has become the first U.S. non-tech company to cross the $1 trillion mark in market capitalization, although it has since slipped back under that level.

Berkshire holds a diversified portfolio managed by one of the smartest teams in the business and has beaten the market handily year after year. I will say that it is currently trading above its average price to book value, but not by enough to be of too much concern. I still think it’s likely to beat the market; it seems Buffett does, too.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Buffett Buys $345 Million More of His Favorite Stock and Dumps $7 Billion of This Key Holding was originally published by The Motley Fool