A Steal of a Deal.

In 2011, the Buffett-led conglomerate paid $5 billion to Bank of America and in exchange they got:

• $5 billion worth of preferred stock, plus
• warrants to purchase 700 million shares of Bank of America's common stock at any time until Sept. 2021 at an exercise price of $7.14 per share.

Given the current value of Bank of America's common stock, plus the roughly $1.5 billion worth of dividends that have already been paid on the preferred stock, that Berkshire's investment has more than tripled in value.

Berkshire's $5 billion investment is now worth $17.4 billion.  What fueled the gain?   

First, the valuation of BofA’s stock has risen considerably since Buffett's well-timed investment in August 2011. Back in 2011, those shares traded for a 47% discount to its tangible book value. Today they trade for a 33% premium to the bank's tangible book value.

And during that time, Bank of America's tangible book value has gone from $13.22 a share to $17.14 today - a 30% increase.

Both trends have been fueled by a steadily improving outlook for the nation's second biggest bank by assets. It's cut $15 billion worth of annual expenses over the past 5 years. And after spending $191 billion on financial crisis-related expenses, it finally put the last of its massive liabilities behind it last year.

More recently, moreover, all bank stocks have gotten a potent shot in the arm thanks to the outcome of this year's presidential election. And the Federal Reserve has played a part too, by raising interest rates this month for only the second time since the financial crisis.

In short, while no one should be surprised anymore at Buffett's prescience, it's still incredible to see a deal like this work out so incredibly well for the 86-year-old Oracle of Omaha.