Warren Buffett’s conglomerate holding company Berkshire Hathaway recently made some big changes in its investments. The company massively cut Walmart holdings and in turn made some big investments in the 4 main United States airlines.
Berkshire Hathaway began the process of cutting stake in Walmart during the third quarter of the year, when the company decreased its shares by almost 30%. Stakes in Wal-Mart have now been cut by 70%, and has left Walmart with 13 million shares available. There has been some speculation as to why Buffett is decreasing his ownership in Walmart, but it’s safe to say he knows what he is doing.
Berkshire Hathaway quickly placed new bets on all of the major U.S. Airlines. The company first invested in American Airlines Group Inc, Delta Air Lines, and the United Continental Holdings Inc prior to the deadline to be included in this weeks report, but quickly followed up by letting CNBC know Berkshire Hathaway would also be taking a stake in Southwest Airlines.
“I’d feel terrible if the story the next day was why wasn’t Southwest included,” Buffett commented. He did not want investors to think he was purposely avoiding an investment in Southwest Airlines, as he considers co-founder Herb Kelleher a friend.
Berkshire reporting owning $797 million in American Airlines, $249 million in Delta Air Lines, and $237 million in United Continental holdings in the company’s regular filing on Monday. Shares of each of these airlines increased between 3% – 6% during after-hours trading after these investments were made public.
While Berkshire Hathaway making an investment is pretty normal, the strange thing here is that Buffett is investing in airlines. Buffett has been known to avoid airline investments for decades now, as in 1989 he invested in U.S. Airways and quickly lost faith in the industry. By 1995, Buffett was down about $269 million. Since the loss, Buffett has spoke out on multiple occasions against making investments in airlines, saying that they require too much capital and earn very little. It is unclear what made Buffett change his mind.