Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) just filed its 13F, detailing its U.S. stock portfolio as of the end of 2018, showing that the conglomerate led by arguably one of the best bank investors out there increased its big bet on U.S. banks yet again in the fourth quarter.

Berkshire was a net buyer of banks, adding to stakes in Bank of America, U.S. Bancorp, JPMorgan Chase, and super-regional PNC Financial, trimming its stake in just one institution, Wells Fargo.

Warren Buffett at Berkshire Hathaway's annual meeting.

Image source: The Motley Fool.

Buffett's big bet on banks

Warren Buffett doesn't own anything by mistake, and with roughly $76.1 billion of Berkshire's wealth deployed in banks, it's quite clear that Buffett is as bullish on banks as he has ever been.

Tellingly, Berkshire owns a billion-dollar stake in the majority of the largest U.S. banks by assets, suggesting that Buffett's bullish on the prospects for most banks, not just one or two individual institutions. But why?

I'm not Warren Buffett. I can't tell you exactly what he's thinking about banks right now. But based on Buffett's recent behavior with respect to Berkshire's investment portfolio, I suspect his bank-buying habit has a lot to do with interest rates.

It's interesting to me that all the while Buffett is piling into bank stocks (which benefit from rising rates and a steepening yield curve), he's winding down Berkshire's bond portfolio (which would be negatively affected by rising rates and a steepening yield curve).

Check out the latest earnings call transcripts for companies we cover.

Berkshire's shrinking bond portfolio

Everyone pays attention to what stocks Buffett is buying, but fewer pay any attention to what he's doing outside the equity markets. In the bond market, Berkshire has been a net seller. As the bonds the company holds mature or get called away, Buffett is simply choosing to keep Berkshire's money in cash, or the closest thing to it (U.S. Treasury bills).

Bar chart of Berkshire Hathaway's bond holdings in billions of dollars.

Data source: Annual and quarterly reports. As of Sept. 30, 2018, the last date for which data is presently available.

Whereas in the past, Buffett might have used corporate bonds to lock in a high return on Berkshire's cash for five or even 10 years at a time, Buffett wants nothing to do with locking in returns at the current level of interest rates. Instead, Berkshire Hathaway has about $104 billion in cash or Treasury bills and just over $18 billion invested in longer-term, fixed-income securities.

That Buffett is buying big banks, which are a leveraged bet on higher long-term interest rates, while at the same time winding down Berkshire's bond portfolio, suggests to me that the Oracle of Omaha has yet another contrarian view: Long-term rates are headed higher, not lower.