Warren Buffet has eureka moment in tub, invests $5B in B of A

Like the famed Greek mathematician, Archimedes, Warren Buffet has had an eureka moment while taking a bath. Whole soaking, and presumably pondering his next investment, Buffett decided to invest in $5 billion in Bank of America by purchasing 50,000 shares of preferred stock bearing a 6 percent annual dividend. The bank announced the trade on Thursday.

LOS ANGELES, CA (Catholic Online) - Why is Warren Buffett investing in the previously troubled institution? Because it's undervalued. Bank of America's recent controversies caused it to lose much of its share price over the past two years.

However, Buffett noted in a statement that was posted on the BofA website, "Bank of America is a strong, well-led company, and I called Brian [Moynihan] to tell him I wanted to invest in it. I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them."

It may also help that Buffett is earning a 6 percent premium and that Bank of America can buy back the share at any time with another 5 percent premium. Buffett's firm, Berkshire, will also be allowed to buy 700 million of the bank's shares at a price just over $7.14 a share, at any time in the next 10 years it chooses. 

If it is true that Bank of America's troubles are past, then Buffett has made a stellar investment. 
Buffett is known for his occasional investments that serve both as future profits and financial help to cash-strapped companies. In September of 2008, Buffett invested $5 billion into Goldman Sachs which helped the firm and calmed investor's fears over the stability of the banking sector. In November of 2008, Buffett helped again by investing $3 billion into GE.

Extra: Warren Buffet to Congress

Warren Buffett is something of a legend on Wall Street. As one of the richest men in America, he has a cult following of amateur investors who copy his moves in the hopes of enjoying the same windfalls he does. He is closely watched by professional investors, and his decision to invest in bank of America is expected to entice others to invest as well.

As of now, the bank's share price is up by 9% from the opening bell to $7.62, and if the experts are correct, the stock should continue to rise over the long-term.

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