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The Thesis
During the European debt crisis when banks were being sold off again, Buffett invested $5 billion in Bank of America preferred stock with warrants, betting on America's largest bank at distressed prices.
The Story
In August 2011, as the European debt crisis sent bank stocks tumbling and Bank of America's shares fell below $7, Warren Buffett struck a deal over a single phone call: Berkshire Hathaway would invest $5 billion in Bank of America preferred stock paying a 6% dividend, plus receive warrants to buy 700 million shares at $7.14 each. The deal was classic Buffett — structured to provide both downside protection (the preferred stock) and massive upside participation (the warrants).
It became one of Buffett's most profitable investments. Bank of America stabilized, rebuilt its capital base, and its stock gradually recovered. In 2017, Berkshire exercised the warrants, converting to common stock at $7.14 per share. By 2023, with Bank of America trading above $30, Berkshire's position was worth over $35 billion, making it one of Berkshire's largest holdings. The deal demonstrated Buffett's unique ability to act as a one-man lender of last resort to America's largest institutions — providing confidence and capital when both were scarce — and structuring terms that would reward Berkshire handsomely for taking the risk.
Key Insight
In a crisis, those with capital and courage can negotiate extraordinary terms — the willingness to act when others are paralyzed is its own competitive advantage.
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.”
Warren Buffett
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.