When Warren Buffett dramatically trimmed his Apple holdings, Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors, followed suit. She agreed with Buffett that the time was right for profit taking—not least because she thinks the AI-equipped iPhone 16 will not be the “gamechanger” Apple hopes—but, when it comes to another of the Oracle of Omaha’s stock sell-offs, Link decided to stand pat.
That stock is Bank of America[/hotlink], which Buffett’s Berkshire Hathaway has been dumping en masse. Even though the conglomerate still holds a large position, it has sold about $9 billion worth of BoA shares from July through September. Link told Fortune, however, that she is holding on to the stock.
“A lot of people are bullish on financials,” said Link, who manages a $3.5 billion equity portfolio. “I’ve been bullish on financials for the full year. [I] was a bit wrong in the beginning of the year. It’s taken a little bit of time to see some catch up.”
Bank stocks surged broadly on Trump’s win, with investors anticipating deregulation and pent-up M&A demand to be unlocked under his second administration. Shares of Bank of America are up over 10% since election day, essentially mirroring the return of the S&P 500’s industry index.
Link admits she doesn’t like being on the opposite side of America’s most revered investor. Buffett’s $5 billion investment in BofA shortly after the financial crisis served as a major vote of confidence in the second-largest bank in the U.S. and its CEO, Brian Moynihan, who he has long praised.
Admittedly, Buffett’s stock sales are likely not an indication he believes BofA is doomed. After all, it remains Berkshire’s third-largest holding.
It appears a major motivation behind the sell-off was to bring Berkshire’s stake under the 10% threshold that requires rapid disclosure of purchases and sales. When BofA repurchased $3.5 billion of stock in October, putting Berkshire back up above that number, Buffett’s conglomerate sold an additional $370 million in shares.
Nonetheless, the Oracle is now sitting on a record hoard of cash and treasuries worth $325 billion, creating suspicion that he is increasingly worried about risk and believes the stock market is overvalued.
“I worry when I don’t worry,” Link said of her mindset, “because that means we’re complacent.”
Reasons to be bullish on banks
Nonetheless, she has a mostly rosy outlook on markets and, of course, banks. Beyond the story about slightly better growth, more M&A, and less regulation under Trump, there are factors independent of the President-elect that fuel her optimism too.
For one, bank stocks are cheap, she noted, with BofA and many of its competitors trading around 12-13 times forward earnings. That multiple for the S&P 500 currently sits just short of 24.
Meanwhile, a dis-inversion of the yield curve should also represent a huge boost to bank bottom lines. Their bread-and-bitter business, as Link put it, is borrowing money at short-term rates (often through deposits) and then lending that cash out at higher long-term rates.
“And if you get the steep yield curve to continue, then you have net interest income start to improve,” she said. “You have net interest margin starting to improve.”
Finally, Link is also optimistic about changes to proposed Basel III endgame reforms for the world’s largest banks. The initial version of the incoming regulations would have increased capital requirements for institutions like JPMorgan Chase and BofA to 19%, but an updated proposal put forth by the Federal Reserve would bring that number down to 9%. That means these banks should have more money to lend than initially anticipated.
“That’s why I think it’s more than deregulation,” Link said of her bullish position on financials. “It’s about a lot of different things that are all coming together.”
We’ll see if the Oracle misses out.
