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re: Berkshire Hathaway apparently unloaded their entire airline portfolio
Posted on 5/3/20 at 5:09 pm to The Egg
Posted on 5/3/20 at 5:09 pm to The Egg
It's risk-reward just like any type of speculation. High reward requires high risk and that's exactly what airlines are right now.
Buffet has an obligation to his shareholders to avoid high risk, and it's really what his whole strategy has been throughout his career. It's not surprising he's ditching airlines. So many people look at his opinions and positions in a vacuum without considering why he may have those opinions and positions.
It doesn't mean airlines won't recover, but there's indeed the chance you can lose everything if you start to see bankruptcies. I've been saying it since the crash, be picky with your airlines. Look for the strongest balance sheets & business models and avoid highly leveraged & overextended ones.
The reality is there will be winners and losers, and IMO the winners will come out stronger after this.
Buffet has an obligation to his shareholders to avoid high risk, and it's really what his whole strategy has been throughout his career. It's not surprising he's ditching airlines. So many people look at his opinions and positions in a vacuum without considering why he may have those opinions and positions.
It doesn't mean airlines won't recover, but there's indeed the chance you can lose everything if you start to see bankruptcies. I've been saying it since the crash, be picky with your airlines. Look for the strongest balance sheets & business models and avoid highly leveraged & overextended ones.
The reality is there will be winners and losers, and IMO the winners will come out stronger after this.
0
Posted on 5/3/20 at 6:29 pm to Upperdecker
quote:
Buffett is using his influence on the market to get the best price. Goldman Sachs and others do this as well. Tell the market what you want them to hear, the market will react to what you say, then you profit from it
So you think he just sold huge positions at a loss in order to get back in later at a lower valuation? Do you know who Warren Buffet is and know anything about how he invests?
Posted on 5/3/20 at 7:39 pm to southernelite
quote:
I think you’ll see some companies will reconsider their demand for having their employees fly often. People will cancel delay vacations.
We could still see a 10-15% decline or more in air traffic for the next 12-18 months. That’s going to be a significant hit to airlines.
I was thinking 25%. Now that everyone knows they can communicate remotely for any meeting, I do expect to see less business travel after this is over.
Posted on 5/3/20 at 8:22 pm to The Egg
So...
When investors read this and dump their shares of those 4 airlines this week, further suppressing the stock value, Buffett will just swoop in and buy them back at a further discount?
When investors read this and dump their shares of those 4 airlines this week, further suppressing the stock value, Buffett will just swoop in and buy them back at a further discount?
Posted on 5/4/20 at 3:17 am to EA6B
quote:
After 35 years of working on it, there is still no vaccine for HIV/AIDS, they were unable to develop a vaccine for SARS. And other than cancer were we actually have treatments with some chance of eradicating it from the body, for most other diseases other there is no cure other than antibiotics for infections, and a few antiviral drugs. There are drugs to counteract the effects of heart disease, diabetes, hypertension, and many other diseases, but you will still have the disease
You fundamentally misunderstand the nature of nature if you expect a vaccine or cure for everything. There will never (not in our lifetime) be a vaccine for HIV. That’s just not how it works. We can essentially eliminate aids but hiv will persist as long as homosexuals have sex there are cures for certain types of cancer, Vitamin A can cure a rare leukemia, but most cancers are more complicated and the “cure” be more dangerous than the disease. Cancer is just your own cells escaping the balance of regulation in one or several potential paths that your body naturally has.
Most disease like Heart disease hypertension etc are more physiologic and have more to do with lifestyle, genetics and the fact that humans live long enough for those things to be a factor. You cant escape nature. Viruses evolve faster than humans, Bacteria do too. It’s an evolutionary race and humans are comparatively slower. We won’t ever have a highly effective vaccine for COVID or sars just like we won’t for common cold or influenza because that’s just nature and we aren’t as efficient
Posted on 5/4/20 at 7:21 am to AMS
With their balance sheet I just don't see how LUV isn't a hell of a deal right now.
Posted on 5/4/20 at 8:24 am to truthbetold
I'm buying LUV today. Buffet can panic sell like us too.
Something, something.. be greedy when Buffet is fearful.
Something, something.. be greedy when Buffet is fearful.
Posted on 5/4/20 at 8:29 am to LSUregit
Is it really just him pulling the trigger? Doesn't this baw have a team?
Posted on 5/4/20 at 8:37 am to AMS
quote:
You fundamentally misunderstand the nature of nature if you expect a vaccine or cure for everything. There will never (not in our lifetime) be a vaccine for HIV
I agree, my post was refuting the poster that thinks we will have a COVID19 vaccine in a few months.
Posted on 5/4/20 at 8:48 am to truthbetold
quote:
With their balance sheet I just don't see how LUV isn't a hell of a deal right now.
Added to my LUV position today as well. Nothing has changed except for him unloading his shares.
Posted on 5/4/20 at 8:57 am to Skin
quote:
So WB just unloaded his entire airline portfolio when shares are trading at their lowest price point in a decade (maybe more). During a pandemic at that. Just took the huge losses and ran.
I'm certainly in no position to question his intelligence, but this sounds completely irrational
For decades, he has said he doesn't invest in companies / industries that he "doesn't understand". He doesn't currently understand their financial situation or their financial future, so he got out of it. When that is your investment philosophy, you don't worry about sunk costs.
Will their be a commercial aviation industry in the future? Surely. But who will the players and owners be? Will all the shareholders be lenders who converted their debt into equity in bankruptcy, eliminating all the common in the process? You have to think that it's at least a possibility for some companies.
Posted on 5/4/20 at 9:05 am to UltimaParadox
Added some more LUV and SAVE pretty close to their bottom this morning, let my DAL ride.
Posted on 5/4/20 at 9:06 am to Upperdecker
quote:
People won’t stop going on vacation.
But they might be more interested in 8-10 hr road trips and not international travel, at least for a while.
quote:
The big difference will be businesses doing more Skype or Zoom calls instead of face to face meetings when air travel would be required. Airlines that rely on first class and business class passengers will suffer much more than airlines that are primarily personal use and economy class. American, United, and Delta come out of this a lot worse than Southwest or Spirit or other budget airlines
That's the bread and butter for EVERY airline. Why do you think Southwest pushes their Business Select fares so hard?
quote:
Edit: anyone saying “Buffett is smarter than Money Talk” also needs to consider that Buffett knows his influence on the market. This could be a play to influence the market. Berkshire Hathaway could potentially buy an airline, maybe he’s looking to kill the stock price and buy one in bankruptcy. He obviously has the cash on hand to do it, but he’d be looking to get the bottom dollar price
He owned 9.9% of Southwest stock, right? SW market cap this morning is 15.88B. He could buy out the remaining stock of Southwest and take it private, and do so using 15% of his cash. I guess he could be trying to drive it down a little more, but everything he says is that he wants good companies at a good price. The airlines are already at a good price... but are they currently good companies? I think that's why he dumped.
Posted on 5/4/20 at 9:09 am to JayDeerTay84
quote:
Is it really just him pulling the trigger? Doesn't this baw have a team?
He has a team that manages the stock portfolio which would include the airlines... but for a dump of this size, 100 percent chance this was ultimately his decision (perhaps with advice from others).
Posted on 5/4/20 at 9:33 am to TJG210
quote:
In the short term profits may not be good, but I don’t know a whole lot of alternatives exist if you want to go from San Francisco to New York.
The key word there is IF you want to go from SF to NYC. Buffet's concern is not as many people will want to as before and it may take 5-10 yrs to get back to normal flying rates. Airlines have razor thin margins and even slight drops in passengers affect their profits significantly.
His other major point about airlines is that they have all borrowed tens of billions that have to be paid back at a time when revenues are tough. That will drag down these stocks for a long time. It doesn't mean they will never come back, but there is probably more money to be made in other stocks. So Buffett is cashing in his airline chips at a loss to preserve the ability to buy better stocks when they drop.
Posted on 5/4/20 at 2:31 pm to MillerLiteTime
DCA'd LUV's new lows today. I will either love that move or feel like an absolute idiot in a few months.
Posted on 5/4/20 at 3:03 pm to truthbetold
Same. Strong run up at the close
Posted on 5/4/20 at 4:26 pm to MillerLiteTime
quote:
The key word there is IF you want to go from SF to NYC. Buffet's concern is not as many people will want to as before
I just cannot see that happening for 5 to 10 years. People will be dying to travel again. I would venture to say that if people are working from "home" more they will even travel more because they can work from anywhere. There are tons of people who will either have antibodies or be very healthy and will be willing to take the risk. It just seems so grim now.
Posted on 5/4/20 at 4:51 pm to MillerLiteTime
quote:
His other major point about airlines is that they have all borrowed tens of billions that have to be paid back at a time when revenues are tough. That will drag down these stocks for a long time. It doesn't mean they will never come back, but there is probably more money to be made in other stocks. So Buffett is cashing in his airline chips at a loss to preserve the ability to buy better stocks when they drop.
I believe Buffett is more concerned about insurance/reinsurance capital based on whatever fallout occurs through the next few years and wants to keep internal capital at high levels. Plus he alluded to so much current and future fleet lack of utilization and what happens to all the unneeded planes. It says something that he continued to add additional bank shares and shite canned airlines, must be a big believer in current bank capital levels and broad govt funding throughout the economy.
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