WHEN A MULTI BILLIONAIRE DOESN’T WANT STOCK

When Billionaire Warren Buffett sells all his airline stock at below purchase price you just know life is not good in the aviation industry. He makes very few mistakes.

Warren Buffett, the legendary American investor, has sold his firm’s entire holdings in the four major US airlines, warning that the “world has changed” for the aviation industry because of the coronavirus crisis.

In comments that will send shockwaves through financial markets already pulverised by the economic shock of the outbreak, Buffett said the outbreak could have an “extraordinarily wide” range of possible outcomes.

Shares around the world are poised for another torrid week as worldwide cases of the virus creep towards 3.5 million and deaths near 250,000. Despite massive central bank and government intervention, stock markets have been rocked by the continued spread of Covid-19, the plunge in oil prices and Donald Trump’s threats to reignite his trade war with China.

Buffett, 89, who has become known as the Sage of Omaha for his investment skill over the decades, indicated that he believed stock markets had not reached the bottom of the current dip.

Speaking at the virtual annual meeting of his company Berkshire Hathaway from Omaha, Nebraska, Buffett said he had not provided financial support to companies as he did buying Goldman Sachs shares during the 2008 financial crisis because he saw nothing “attractive” enough, even after the recent plunge in the markets.

The outlook appears particularly bleak for the airline industry, which has been hit by the shutdown of most of its traffic, forcing mass layoffs and even bankruptcies. FlyBe in the UK went into administration in the early days of the crisis and Virgin Atlantic has asked the government for a bailout. British Airways has announced mass redundancies, as has Ryanair. Virgin Australia has collapsed.

Berkshire Hathaway had held sizeable positions in the major US airlines, including an 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines and 9% of United Airlines at the end of 2019, according to its annual report and company filings.

But with thousands of planes parked on tarmac across the world and no clear timetable for the resumption of air travel, Buffett said he had sold his stocks as the airline industry’s outlook rapidly changed.

theguardian.com 3 May 2020