COVID 19 Pandemic forces Warren Buffett to cut stock holdings

COVID 19 Pandemic forces Warren Buffett to cut stock holdings

Warren Buffett’s Berkshire Hathaway Inc. cut his stock holdings this week in Delta Air Lines Inc. and Southwest Airlines Co. as the airline industry faces a bleak future due to the coronavirus pandemic.

Berkshire cut its Southwest holding by 4 percent and its Delta stake by 18 percent, according to regulatory filings Friday. That reduced the exposure of Buffett’s company to an industry in freefall, with Delta predicting a 90 percent drop in second-quarter sales and competitors making similarly dire forecasts.

Warren Buffett’s Berkshire Hathaway Inc. spent this week selling shares of Delta Air Lines Inc. and Southwest Airlines Co.

Berkshire sold nearly 13 million shares in Delta and roughly 2.3 million shares of Southwest, according to regulatory filings Friday.

That left Buffett’s company with a $1.32 billion stake in Delta and a $1.57 billion holding of Southwest stock.
Delta fell 10 per cent to $20.15 after the close of regular trading in New York, with Southwest and other airlines down as well. A Standard & Poor’s index of major US carriers has tumbled 60 per cent this year, paced by the 74 per cent drop of United Airlines Holdings Inc.

Airlines are applying for federal aid as the government steps in with cash assistance for passenger carriers of $25 billion to help make payroll, plus another $25 billion in loans.

Why is Warren Buffett cutting his airline stakes?

Airlines across the U.S. have been pummeled by a steep drop-off in travel as the coronavirus spreads throughout the country. Delta Chief Executive Officer Ed Bastian said Friday in a memo that it expects second-quarter revenue to fall 90%.
The billionaire was a longtime critic of the airline industry after making a bet on US Airways that he called a “mistake.” In late 2016, however, Berkshire revealed major investments in the big US airlines. Buffett has said that some of the issues in the industry had stabilized as competition dwindled.
Berkshire has seen enough to pare its holdings. Buffett’s company still has a $1.32 billion stake in Delta and a $1.57 billion investment in Southwest. Berkshire has to report mid-quarter changes because its holdings in those airlines are above a 10 per cent threshold.

Buffett’s company also has previously reported investments in American and United, but doesn’t have to disclose changes to those stakes as frequently since he’s below a 10 per cent ownership level.