The travails and triumphs of the market visited two of its mavens this week, when a PR fiasco sunk Warren Buffett (Trades, Portfolio) stock United Airlines (UAL, Financial) and an unlikely burst occurred in one of Prem Watsa (Trades, Portfolio)’s most stubborn stocks, BlackBerry (BBRY, Financial).
Shares of United Continental Holdings dropped 4.29% on Monday and Tuesday, shaving $88.9 million off of Buffett’s holding as it sunk from $2.07 billion in value to $1.98 billion. The drop came not from operational trouble but from investors turned off by the airline’s treatment of a passenger aboard a flight and its subsequent handling of the blowback.
The impact to Buffett’s portfolio will be marginal, however. The head of Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) and one of the world’s richest men bought his 9.2% stake in United for an average price of $61 per share, rendering a 16% gain in spite of the loss.
In a larger context, Buffett’s United investment has dipped lower as recently as mid-March and has gained 74% since he stepped in starting in the third quarter. Already, investors have jumped on the lower price and bid up shares to $70.55 in mid-afternoon Wednesday, closing in on their $71.53 price Monday and recovering much of Buffett’s dent.
Measured against Buffett’s $8.47 billion in airline investments, the worst of United’s decline this week represented around just 1%. Still, a further upset at United would hit his portfolio the hardest of his airline stocks given that it is his biggest stake, followed by 9.03% of American Airlines, 8.21% of Delta Airlines and 7.02% of Southwest Airlines.
Shares of BlackBerry Ltd., the top holding of Prem Watsa (Trades, Portfolio), went the opposite direction, rallying around 18% Wednesday to their highest since June 2014. The gains placed the former smartphone pioneer up 29.9% for the year to date as it remained down 29.4% for the past five years.
Investors became more enthusiastic about the struggling Canadian tech company due to an arbitration decision awarded it $814.87 million in royalty overpayments to Qualcomm Inc. (QCOM, Financial). The two companies agreed to enter arbitration for their dispute over whether Qualcomm owed BlackBerry for royalty payments made under a licensing agreement.
"BlackBerry and Qualcomm have a longstanding relationship and continue to be valued technology partners," John Chen, Executive Chairman and CEO of BlackBerry said in a statement. "We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry."
A ruling against BlackBerry would have taken a heavy toll on the company, which has about $1.34 billion in cash on its balance sheet and generated negative free cash flow last year.
Prem Watsa (Trades, Portfolio), who operates Fairfax Financial Holdings (TSX:FFH, Financial) has far to go to recover his 49% loss on his holding, but Wednesday boosted its value by $57.94 million to $417.72 million. Even more than with Buffett and United, changes to BlackBerry inordinately affect Watsa’s portfolio because his 8.8% stake takes up 27.5% of space.
See Warren Buffett (Trades, Portfolio)’s portfolio here and Prem Watsa (Trades, Portfolio)’s portfolio here.
