Sorry - Buffett Didn't Buy. He Sold.
At the end of 2019, Berkshire Hathaway held roughly $125 billion in cash and cash equivalents. The reason? Warren Buffett couldn't find anything to buy. There were no "elephants" available that were of good value to Buffett, and the times that he did try to buy a company, Buffett would get out-bid.
There was just too much money sloshing around in the system, and Buffett's penchant for buying wonderful companies for a good price was proving to be irrelevant in an easy money environment.
Instead, people were buying any type of company for any kind of price, and Buffett wasn't willing to play that game.
When the markets buckled due to the Coronavirus earlier this year, everybody figured that Buffett was going to be looking to put some of that cash to work. They waited. And waited. And waited.
Surely Buffett would be looking to buy an airline outright? Maybe make another investment in a blue chip name that was struggling for cash? Maybe secure some of those 10% preferred shares with the warrants attached?
Earlier today, Buffett made his first major move since the markets fell apart.
instead of buying, Buffett sold.
Buffett sold shares in two of his airline holdings - Delta Air Lines and Southwest Airlines. The Delta Air Lines sale was more significant, as he sold roughly 18% of Berkshire Hathaway's stake in the company.
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Buffett didn't have any comment on the sales, but I'd like to point out a couple of things.
First, Berkshire Hathaway bought more shares of Delta just a few weeks ago, so between then and now, Buffett decided that he wanted to decrease his company's exposure to the airline industry.
That is not exactly great news for the beleaguered industry, especially considering the fact that many people figured that Buffett would be front and center to lend the industry money.
Second, Buffett famously reversed his position on airlines in 2016, deciding that he wanted to own them again after swearing off of them for many years. Is he going bearish on the industry yet again?
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The airline industry is currently in shambles in the United States right now, and it appears as though it might be losing a very big backer in the form of Warren Buffett.
Any interpretation of Buffett's sale is no good for airline stocks.
Filed under: General Knowledge
