Investors Thursday shrugged off billionaire investor Warren Buffett's decision to cut his stake in PNC Bank Corp.
Trading in the shares was heavy, sending the stock down only 12.5 cents, to $30.625 a share, after Mr. Buffett's Omaha investment vehicle, Berkshire Hathaway Inc., disclosed its stake in the Pittsburgh bank company had fallen below 5%, from 8.3% at the end of 1994.
Rumors had been swirling for months that the influential investor was bailing out of the investment. He reportedly was dissatisfied that PNC had suspended its share buyback program to free up capital for its acquisition of Midlantic Corp.
In the wake of the long-awaited disclosure, which came late Wednesday, investors seemed to take heart that Mr. Buffett apparently has not abandoned PNC entirely. Although some analysts speculated that Mr. Buffett now holds well under 5%, the bank said he remains a "substantial shareholder."
Assuming he now holds 4.9%, the reduction amounts to about $50 million worth of PNC shares. Some analysts said it is only a matter of time before Mr. Buffett sheds all his PNC exposure.
"The Midlantic acquisition will be more dilutive than people currently believe, maybe 8% per share this year," said Michael Durante, a bank analyst at McDonald & Co. in Cleveland. "I wouldn't be shocked if this was one of the reasons" Mr. Buffett has been selling the stock, he said.
"Why would Buffett sell all these shares unless he intended to leave PNC entirely?" asked one investor, who requested anonymity.
Observers agreed that the move was unusual for Mr. Buffett. While he apparently will make a profit on sale of the PNC shares, he is known for longer-term investments that generate fabulous returns.
His largest current bank holding, in Wells Fargo & Co., is a case in point. Mr. Buffett bought his stake in Wells in the early 1990s when the stock was trading in the mid-$50 range. Wells currently trades for more than $250 a share.
At the end of 1994, when Mr. Buffett had amassed his 8.3% position in PNC, the stock was trading in the low $20s. But that was its low for the year, so he probably had bought many of the shares in the mid-$20 range.
Selling PNC shares in the high $20s or low $30s would not be the kind of slam dunk that earned Mr. Buffett his reputation as "the Wizard of Omaha."
Even before the reduction in his stake, Mr. Buffett's ownership position would have dropped to 5.6% because 112 million shares were issued to acquire Midlantic, a PNC spokesman said.
In Thursday trading, bank stocks outpaced the market. The Standard & Poor's index of major banks fell 0.08%, while the S&P 500 fell 0.67%. Still, Wall Street analyst are increasingly negative on the sector.
Anthony Davis of Dean Witter Reynolds Inc. became the latest analyst to turn bearish on the bank sector. Warning of a downturn in the credit cycle from now through late 1997, he downgraded six banks and now has only eight "buy" recommendations among the 27 companies he follows.
He reduced Barnett Banks Inc., Compass Bancshares, Southern National Corp., and SouthTrust Corp. to "neutral" from "accumulate." And he downgraded Signet Banking Corp. to "accumulate" from "buy" and Star Banc Corp. to "neutral" from "buy."
Bank of Boston Corp. stock rose in heavy volume for the second day in a row. After rising $1.375 a share Wednesday, the stock rose $1 Thursday, to $49.
The bank would not comment on the run-up, but market sources said Mr. Buffett may be buying its shares. Rumors that a large foreign bank was interested in the company were also boosting the share price, sources said.
UJB Financial Corp. rose $2.75 a share, to $39.75, and NationsBank Corp. rose 87.5 cents, to $74. Shares of U.S. Bancorp fell $1, to $31, as investors continued to punish the company for its Monday announcement of what many considered a pricey deal for California Bancshares.
