TOPLINE
The Sales
As he outlined in early May Buffett has sold down his publicly traded airline holdings such as Delta and Southwest Airlines LUV. In fact he said he’s sold out of all of them entirely. He appears mainly worried about load factors. That’s investment jargon for how many seats are booked. Essentially when demand returns for airlines, he’s worried that it will be below former levels. The number of planes is unlikely to change all that much, so airlines will have similar costs with fewer passengers. That concerns Buffett, and his reason to exit all his major airline holdings. He mentions this doesn’t make him bearish on stocks and it’s not a verdict on airline management but, when he purchased these stocks he thought that prospects for airlines had materially improved. Now he’s reversed course due to the pandemic. In his mind a low-probability event happened, in this case the pandemic, and his views have changed accordingly.
Buffett has sold down his holdings in various financial firms. He has given less context for these sales, but certain trades and holdings require SEC disclosure. He’s sold down positions in US Bancorp USB, BNY Mellon and Goldman Sachs. He may have sold down other holdings more recently too since not every trade is disclosed and holdings are only shared after a delay of several weeks. He doesn’t seem to be making any major purchases.
Billionaire investor Warren Buffett, who told investors earlier this month that he had made a “mistake” betting on airlines, is continuing to sell stocks amid the coronavirus pandemic, the latest regulatory filing from Berkshire Hathaway shows.
Buffett sold 84% of his stake in Goldman Sachs, a longtime holding.
2017 DANIEL ZUCHNIK/WIREIMAGE
KEY FACTS
Buffett has remained relatively quiet during the coronavirus market downturn: Rather than make any “elephant-sized” acquisitions, he’s trimmed Berkshire’s holdings—mostly banks and airlines so far—and grown its cash pile to $137 billion.
- The Oracle of Omaha’s biggest recent move was to sell off most 84% of his stake in Goldman Sachs, a longtime holding which he famously invested $5 billion into during the 2008 financial crisis.
- Buffett decreased his stake in Goldman, which saw its stock plunge over 30% in the first quarter, from over 12 million shares to just under two million; His remaining investment is valued at around $330 million, Berkshire’s filing shows.
- Berkshire Hathaway cut its stake in another bank, JPMorgan Chase & Co., by 3% in the first quarter, while also fully exiting positions in insurance giant Travelers and energy company Phillips 66.
Berkshire cut its investment in e-commerce giant Amazon by 0.7% in the first quarter—a relatively new bet first disclosed in 2019—as the retailer has warned of mounting costs as it faces challenges related to the pandemic.
Berkshire has been doing some small-scale buying during the pandemic as well, however: Buffett ended up boosting the conglomerate’s stake in PNC Financial Services Group, a bank which is among the biggest lenders in the United States, to 6%.
KEY BACKGROUND
Buffett’s Berkshire Hathaway BRK.B reported a massive net loss of nearly $50 billion in the first quarter. The investing conglomerate sold $6.5 billion worth of stocks in the month of April, compared to buying only $426 million worth of equities during that period. “We did very little in the first quarter,” Buffett admitted at the company’s annual shareholder meeting in early May. The coronavirus market sell-off that occurred in late February and through most of March took a significant toll on the company’s businesses, he said. Berkshire’s cash pile rose from $125 billion to $137.3 billion, as the Oracle of Omaha continues to look for an elephant-size acquisition. Buffett also told investors that he had sold all of the company’s airline stocks, admitting that he had made a “mistake” and that “the world has changed for airlines.” Berkshire cut its holdings in the four largest U.S. airlines—United, American, Southwest CSWC and Delta Airlines DAL, which were cumulatively worth more than $4 billion.
WHAT TO WATCH FOR
In a remark similar to the ones he made to calm markets during the 2008 financial crisis—urging people to “Buy American,” Buffett recently said that he is optimistic that the U.S. economy can bounce back and overcome coronavirus.
“I remain convinced… nothing can basically stop America,” he told Berkshire shareholders at the annual meeting. “In the end, the answer is: Never bet against America.”
