A Foolish Take: Buffett's bet on Bank of America pays off
Data sources: Bank of America, author's calculations. Chart by author.
Berkshire bought $5 billion worth of preferred stock in the bank, yielding $300 million a year in annual dividends. To sweeten the pot, Bank of America threw in stock options that give Berkshire the right to buy 700 million shares of the bank's common stock for $7.14 each, which is now well below their price of more than $24 a share.
If you add up the value of these components today, Berkshire's $5 billion investment in Bank of America is worth just under $19 billion. It clearly pays to be greedy when others are fearful.
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John Maxfield owns shares of Bank of America. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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