Several days ago, it was announced that Warren Buffett had become Bank of America’s (NYSE:BAC) largest common shareholder. He finally exercised his warrant options to buy 700 million shares of Bank of America voting common stock in exchange for his $5 B of 6% yielding preferred stock.
The transaction itself is quite profitable for Buffett, but a closer analysis also shows that Buffett perhaps believes the bank has even better growth prospects on the horizon. Buffett bought the options and securities in 2011 as part of Bank of America’s capital-raising plan and as part of Buffett’s larger investment in the financial services industry at the time.
However, Bank of America has been on a tear recently, being up over 50% year on year and with fundamental valuation metrics that are in line with the other major financial services providers.