Buffett's Berkshire Hathaway (BRK.A) has announced today that they will invest $5 billion in Bank of America (BAC) to help the bank deal with losses related to subprime mortgages. This move is seen many market players as a vote of confidence in the battered banking giant. It's also similar to what Buffett did with Goldman Sachs Group (GS) back in September 2008 during the credit crisis when he took a $5 billion stake in the investment bank. Keep in mind that after Buffett stepped into Goldman, the stock fell 58%.
Berkshire has agreed to buy 50,000 preferred shares that will pay a 6% annual dividend. Bank of America has the option to buy back the shares at any time for a 5% premium. Bank of America shares were initially up over 20% as the stock printed a daily high this morning at $8.80 a share. Since that opening pop, the stock has now pulled back to below $8 a share.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV