25 August 2011: Buffett invests $5 billion in Bank of America
With Bank of America's shares sliding amid fears about mortgage losses and capital, Warren Buffett's Berkshire Hathaway invested $5 billion in preferred stock paying a 6 percent dividend, plus warrants to buy 700 million common shares. The confidence boost helped steady the bank. Berkshire later exercised the warrants, and the investment produced huge gains. Buffett got paid well for supplying something scarce: calm money when others were scared.
The lesson: Patient capital offered during a panic can earn exceptional returns on very favorable terms.
What it meant for investors
$1,000 in Bank of America at the start of 2012 → $8,333 today, vs $5,312 in the S&P 500.
We start the clock at the start of 2012, the first year in our price data after the event. That is 8.3 times the money, and $3,021 more than a plain index fund made over the same years.
What Bank of America teaches: Acquisitions made at the top of a cycle can haunt shareholders for decades; buying a competitor cheaply in a panic is not the same as buying it well.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2012 | $6.00 | $8,333 | $5,312 |
| 2015 | $18.00 | $2,778 | $3,301 |
| 2018 | $30.00 | $1,667 | $2,519 |
green = beat the S&P 500 · red = lost money
What if you bought Bank of America? Every starting year and the full story →
More Bank of America history
- 16 January 2009: Bank of America needs a second rescue
- 14 October 2008: Washington buys stakes in the big banks
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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