Berkshire Hathaway sells a bunch of airline shares — "Smart Money" cuts its losses
Got that "finfluencer" clout... That's financial influencer (not to be confused with the much more prevalent fake influencer). And Warren Buffett's got a fat blue check mark as one of the biggest finfluencers on earth — investors closely stalk Warren's money moves. Now, his famous holding company Berkshire Hathaway just sold:
- 13M shares of Delta for $314M, or 18% of Berkshire's Delta investment. Delta stock plunged 7% on the news.
- 2.3M shares of Southwest for $74M, or 4% of Berkshire's total Southwest investment. The stock fell 5%.
Buffett's style is eyeglasses, khakis... and a long-term investment approach that involves "buying the dip." But fundamental facts around airlines have changed with the corona-conomy. Even though the government stands ready to bail them out (with strings attached), airlines are footing massive expenses while earning near 0 sales. Get these stats:
- TSA reported a 95% drop in travelers on Sunday compared to a year ago (122K vs 2.5M).
- Delta projects a 90% sales drop for the quarter — CEO Ed Bastian said the airline is losing over $60M in cash every day and "we still haven't seen the bottom."
- Airlines could lose up to $115B in revenue for the first half of 2020, as 93% of people worldwide are living in countries with travel restrictions.
This is a "hedge your losses" move... Not a "lost cause" move (for now). Berkshire still owns 82% of its pre-sale Delta holding and 95% of its Southwest one — but now it believes returns on these investments will be underwhelming (or non-existent) for a while. In the short term, Warren can use the proceeds of the sale to make higher-return investments. In the long-term, he's keeping a big old foot in the door hoping airlines will inevitably bounce back.