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Buffett is out of the airline indusry game. There was bar room chatter a few years ago when he took his positions he'd eventually weigh into the best of his 4 investments and go for an elephant-sized buy in....now...obviously not so much.

https://markets.businessinsider.com/new ... 1029156875

The last I read he is not out completely, he is wanting to get below 10% ownership on airline and some bank stocks during the bailout. Speculation is that he will try to influence their policies, I think that he might be preparing for a buyout. This may have changed since I last read this...


On April 1 and 2, Berkshire sold about 13 million shares of Delta Air Lines (NYSE: DAL), raising $314 million in cash and taking his stake in Delta down from more than 11% to about 9.24%.

Berkshire also sold shares of Southwest Airlines (NYSE: LUV) in that time period, with a smaller sale of 2.3 million shares raising about $74 million and leaving the insurance giant with a 9.92% stake in the Dallas-based airline.

Later in April, Buffett sold 860,000 shares of Bank of New York Mellon (NYSE: BK), raising $30 million and leaving Berkshire with a 9.96% stake in the banking institution.

Those sales made huge news, raising all sorts of questions about Buffett's motivations. But if you look closely, you'll notice that the moves took all of those stocks below the 10% ownership threshold. Amid the storm and fury, it's possible that the implications of 10% ownership were the primary motivations for selling the stocks.


What 10% ownership means

There are surprisingly large ramifications from owning a 10% stake in a publicly traded company. One core securities law comes into play, as Section 16(b) of the Securities Exchange Act of 1934 limits the ability of 10% owners to make ongoing trades in a stock, as the 10% owner essentially gains insider status and invites litigation if it continues to buy and sell shares. That's not such a large issue for Buffett, who tends not to trade his positions frequently, but it often comes into play for activist investors looking to influence corporate policy. That's why you'll so frequently see activists take 9.9% or smaller stakes in the companies they've chosen to engage. It leaves them with greater flexibility to exit their positions if they choose later on.

There are restrictions on those who own 5% or more of a company's shares, but they're less severe. In particular, 5% owners are required to file initial disclosures revealing that they've passed that threshold, but they get 10 days to do so. Again, that's a relatively minor issue for Buffett.

The biggest issue for Berkshire is the set of rules governing bank holding companies. Owning 10% or more of a banking institution could force the insurer to face the same regulations that major financial players in the banking industry have to obey, including capital requirements and oversight from the Federal Reserve and other bank regulators. Buffett has repeatedly sold shares of other banks to keep under the 10% threshold, so the recent sale of BNY Mellon isn't surprising in that context.

https://finance.yahoo.com/news/buffett- ... 15867.html

This is a typical slight of hand move by Buffett. I am sure that the hurting airlines are a good reason to dump them, but he is not someone who typically sells low and IMO watching him get just below 10% on each shows that he has other intentions that he is not advertising. Perhaps he believes a bankruptcy is coming which will tank the stocks, but then he can come in and offer them a buy out for pennies on the dollar while pushing their reorganization policies to his liking?

Fu, if I'm reading the article correctly, Buffett now says that he sold an extra $5.5 billion in airline stock above what you quoted.

The airline news comes from his address yesterday, which I had on in the background, in lieu of the annual Berkshire Hathaway Conference in Omaha, where he'd get up and discuss his positions, entrances and exits in front of a good 18,000 people at the arena. I believe your article is from earlier in April

Berkshire is always quite an amazing event -- and it's always fun because he usually will speak in the morning and then it's fun to watch a bunch of people flock to the airport in their jets to get down to Louisville in time for the Derby.

It's interesting to note his "upbeat comments" on an industry after he's sold out of his stakes. But as I've seen it heard and discussed, many people follow his actions much more than what he says.

Pardon me if I'm reading them wrong, but my article and yours both state that he sold in April, the author of mine dug a little deeper and found the 9% numbers though. I see nothing that explicitly states he sold in stages or to an amount that would take him less than the 9% (beyond the generalizing statement that he sold it all). Also, I don't see the point in selling to a 9.xxx% point and then selling again.

You guys may be right, I just don't see it state that in either article. Please let me know if I missed something.

Yes Gavin, I have read some books on him and have followed the later part of his career, he is rarely wrong, and to see him completely sell off while at the bottom of the market is surprising for him- its not what good investors typically do. I have seen his comments not match his actions time and time again, he knows not to let the cat out of the bag, whatever that may be in this case.

You might not have missed much from the original post, as it was somewhat vague. I did some research and the drop below 10% allowed them (as you noted) to then divest entirely with no notice.

The folks at the Fool claim that BRK now has 0 airline holdings.

https://www.fool.com/investing/2020/05/03/warren-buffett-dumps-berkshire-airline-stocks.aspx

The Hill says the same thing. Technically they're just taking Buffet's word on it all.

https://thehill.com/policy/finance/495840-warren-buffetts-berkshire-hathaway-sells-entire-stake-in-us-airlines

I might invest in the airlines later on, but I still have suspicions that we're going to see a large and negative trend. Hope that I'm wrong.

I read it as he sold 18% of Delta shares and 4% of Southwest shares in early April. As of late April he has divested completely of all airline stocks.

https://www.reuters.com/article/us-berkshire-airlines-idUSKBN22E0VP

Berkshire disclosed on April 3 it had sold about 18% of its Delta stake and 4% of its Southwest shares.

(Reuters) - Berkshire Hathaway Inc (BRKa.N) sold its entire stakes in the four largest U.S. airlines in April, Chairman Warren Buffett said Saturday at the company’s annual meeting, saying “the world has changed” for the aviation industry.

Yes, that is what I gathered... that there are general statements that he sold the whole kit and caboodle but the numbers are a bit confusing to back that up. In the end, I'm just watching what he buys, like always. His silver buy, the railroad buy.... he's always fun to watch. If he jumps in like a bully when the airlines are even lower, that's typical Buffett.

As for the industry, I am afraid too...

Lots more stories have come out stating that he has sold all of it, I think we can assume that's true.

Still, that is remarkable for someone like Buffett to not keep his investment for a rebound. That he doesn't think there will be one for a long time and he prefers the very devalued liquidity is scary for aviation.

I was thinking about the motivations for dumping the stocks at such a low price. Besides the obvious that he doesn't expect a rebound anytime soon and would prefer the liquidity, but I am convinced that Warren Buffett is thinking that a majority of US Airlines will declare bankruptcy, therefore dumping the stock now is the only choice.

Airlines having hundreds of aircraft ($100+ million dollar assets) sitting on the ground with no future projections of many of them getting in the air soon, means that they many of them will have to declare bankruptcy. This will allow for them to dump a large number of their more expensive leased/financed aircraft that don't fit into the new passenger volumes and will also allow for them to cut other huge assets (remember the AA bankruptcy where they attempted to cut pensions by over 50%?). I think the public will not except the amount of serial government bailouts that would be needed for such a protracted length of time and the only answer are mass bankruptcies.

Of course this will have to be on an airline by airline basis, but I can see UA, AA, DL, G4 and others having to do so. I am not so sure about WN..

Who knows, but I think we will see a long line of US majors declaring bankruptcy over the next year.