A Foolish Take: Buffett's bet on Bank of America pays off

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.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.



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