Warren Buffett abandons USA airlines with a $6B billion stock sale

Marco Green
May 4, 2020

The BNSF railroad saw shipping volumes of consumer products and coal fall, while Geico set aside money for auto insurance premiums it no longer expects to collect.

Buffett also announced Saturday that his company had sold all its stakes in four major USA airlines last month, as the pandemic clobbered the travel industry.

Berkshire Hathaway had built up shareholdings in four major airlines and was a top three shareholder after acquiring an 11pc stake in Delta, 10pc of American Airlines, 10pc of Southwest Airlines and 9pc of United Airlines.

Berkshire said it bought only a net $1.8 billion of stocks in the first quarter.

"Historically, Buffett has been so visible in times of crisis, and encouraged investors to take advantage of market selloffs, but if he doesn't see opportunities even in his own stock, what are we to think?" said Jim Shanahan, an analyst at Edward Jones & Co in St. Louis.

Buffett made the remarks during the shareholder meeting, which this year is being held in a virtual format as most states are under shelter-in-place measures due to COVID-19.

Berkshire is sitting on a pile of more than $137 billion cash because Buffett has struggled to find major acquisitions for the company recently. Buffett acknowledged that Berkshire doesn't need that much on hand, adding that he still aims to keep his company as a "Fort Knox", stout enough to weather the pandemic.

Berkshire's first-quarter net loss was $49.75 billion, or $30,653 per Class A share, reflecting $54.52 billion of losses on stock and other investments. That's down from last year's profit of $21.66bn, or $13,209 per Class A share.

Warren Buffett's company reported a almost $50 billion (Dh183.6bn) loss on Saturday because of a huge drop in the paper value of its investments, though the company is still sitting on a huge pile of cash.

Geico was able to post a 28% gain in pre-tax underwriting profit because people drove less, resulting in fewer claims for crashes. Shares of the financial conglomerate itself fell in price by 19%. Maintaining that discipline is gratifying to longtime investors, said James Armstrong, who manages money, including Berkshire shares, as president of Henry H. Armstrong Associates.

Buffett has long said Berkshire's operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. Buffett said that Munger, 96, was still in fine health, but it didn't make sense for him to travel from California or to have another vice chairman, Ajit Jain, come in from the East Coast in this age of social distancing.

Other reports by Click Lancashire

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