Warren Buffett Makes Surprising Shift on Airline Stocks

The airline industry received a major stamp of approval earlier this week after it was revealed that Warren Buffett had purchased stakes in four major airlines for Berkshire Hathaway and its shareholders.

In the past quarter, Berkshire Hathaway bought:

21,770,555 shares of American Airlines
6,333,923 shares of Delta Air Lines
4,533,013 shares of United Continental

In addition, Buffett also revealed that Berkshire Hathaway had purchased shares in Southwest Airlines Co. following the end of the third quarter.

Airline stocks predictably surged on the news, with United trading up nearly 5% on the day.

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As mentioned, Buffett's interest in airline stocks marked a dramatic change from his past views on the industry.

In the past, Buffett has referred to the industry as a "death trap". Other prominent money managers have been calling the industry remarkably cheap over the past few months, and Buffett obviously now agrees with this assessment. Airline companies have, in the past, possessed very weak balance sheets and a myriad of other issues (unions, etc), though these problems have abated enough so that Buffett nows feel safe putting some of Berkshire Hathaway's money to work in the industry.

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Buffett is set in his ways when it comes to his overall investment methodology, though he is flexible enough to re-visit industries that he has previously trashed when the circumstances dictate another look.

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