Advertisement
stocks

Buffett Pulls Back on Airline Stocks, But Don't Fret ... Yet

The Oracle said he wouldn't sell airline stocks getting crushed by coronavirus, but then he did. What does it mean?

Berkshire Hathaway (BRK.B) chief Warren Buffett embraced airline stocks in a big way back in 2016, added to his holdings in February and said in March that he "won't be selling airline stocks" even as the industry reeled under the coronavirus-led collapse in air travel.

And then Warren Buffett up and sold some airline stocks.

On Friday, April 3, investors learned through regulatory disclosures that Berkshire had ditched 13 million shares of Delta Air Lines (DAL, $22.48) and 2.3 million shares of Southwest Airlines (LUV, $30.54). This revelation came earlier than the mid-May release of Berkshire's Form 13F because the firm held 10%-plus stakes in Delta and Southwest, mandating Buffett's holding company immediately disclose any material changes to those positions.

Advertisement - Article continues below

Berkshire also owns stakes in United Airlines (UAL, $22.89) and American Airlines (AAL, $9.39), but because those stakes are less than 10%, we likely won't find out about any moves in those holdings until the May 13F release.

Berkshire's Smaller Airline Stakes

Berkshire cut its DAL holdings by 18%. That's a substantial pullback but hardly a full-scale dumping. Berkshire's remaining stake of almost 59 million shares was worth about $1.3 billion as of April 3. And, importantly, BRK.B remains Delta's largest shareholder with 9.2% of the company's shares outstanding.

Advertisement
Advertisement - Article continues below

It's possible that Buffett pared the DAL stake only to get below the 10% ownership threshold that would trigger regulatory headaches, but neither he nor anyone else from Berkshire has commented on the sale.

As for LUV, Berkshire pared its stake by just 4%. The holding company still owns more than 51 million shares worth about $1.6 billion. And BRK.B remains Southwest's largest shareholder with 9.9% of the airline's shares outstanding. Again, it's possible Berkshire trimmed its LUV stake to stay on the right side of the 10% ownership threshold.

Advertisement - Article continues below

It's understandable if the Delta divestiture in particular left some investors scratching their heads. As recently as late February, Berkshire bought another 976,507 Delta shares. And then in an interview with Yahoo Finance on March 13, Buffett stated categorically, "I won't be selling airline stocks."

But then he did.

Buffett made no comment as to why he sold, which is typical, as he rarely comments on changes to Berkshire's portfolio.

Why Did Buffett Make the About-Face?

It's true that much has changed in the weeks since Buffett said he was standing pat. DAL stock has tumbled 41% since March 13 and is down 62% since the bull market top of Feb. 19. LUV has lost 26% since March 13 and cratered 47% since Feb. 19. The S&P 500 is off 26% since its mid-February peak.

It's also the case that elite investors admit when they're wrong and act accordingly. Perhaps Buffett is just taking his own advice: "The most important thing to do if you find yourself in a hole is to stop digging."

But a little perspective is in order, too.

Berkshire remains the No. 1 and No. 2 shareholder in DAL and LUV, respectively. The two airlines combined represent about 1.7% of Berkshire Hathaway's equity portfolio.

And, for good measure, Buffett's fund still has 82% of the Delta stake it reported in February, and 96% of the Southwest stake.

It goes without saying that the market will be following Buffett's moves in the airline sector even more closely than usual. But as disheartening as it might be to see Buffett sell these shares, it tells us nothing conclusive. Berkshire Hathaway remains very much involved in the air carrier industry.

Uncle Warren hasn't pulled the ripcord. At least not yet.

Advertisement
Advertisement

Most Popular

How To Buy a Roth IRA When You Make Too Much To Qualify For One
Roth IRAs

How To Buy a Roth IRA When You Make Too Much To Qualify For One

With their tax-free growth and tax-free withdrawals, Roth IRAs are a great deal — if you qualify. If you don’t, well, there’s still a way to get into …
September 23, 2020
Social Security Recipients, Veterans Must Act Now to Get Extra $500 Stimulus Check
Coronavirus and Your Money

Social Security Recipients, Veterans Must Act Now to Get Extra $500 Stimulus Check

The deadline for seniors and veterans to request an additional $500 stimulus check for a dependent child is approaching fast. See how you can claim yo…
September 25, 2020
High-Tech Aids for Aging in Place
Caregiving

High-Tech Aids for Aging in Place

Apple Watch and other technology provides fast feedback, comfort for older users, and a powerful assist for caregivers.
September 23, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Stock Market Today 9/25/20: Stocks Win the Session but Lose the Week on Growth Fears
stocks

Stock Market Today 9/25/20: Stocks Win the Session but Lose the Week on Growth Fears

The market ended a choppy week of trading with gains, but the Dow and S&P 500 fell on a weekly basis yet again.
September 25, 2020
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
September 25, 2020
Stock Market Today 9/24/20: Tech Props up a Tepid Market
Markets

Stock Market Today 9/24/20: Tech Props up a Tepid Market

A roller coaster session managed to finish in positive territory thanks to some big-name tech stocks.
September 24, 2020