1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
James Li
James Li
Articles (565)  | Author's Website |

Warren Buffett’s Airline Holdings Plunge in 2-Day Sector Selloff

United’s expansion plan sparks fears of a potential airline fare war

January 25, 2018 | About:

Warren Buffett (Trades, Portfolio)’s holdings in airlines nosedived approximately $1 billion in value from Jan. 23 to Jan. 25 amid fears of a potential price war among the carriers.

United Continental Holdings Inc. (NASDAQ:UAL) tumbled over 15% over a two-day period on the announcement of the airline’s plan to increase annual capacity between 4% and 6% by 2020. Although the company said that such expansion could lead to strong earnings growth over the next three years, its growth plans also raised concerns about declining airfares, according to CNBC columnists F. Imbert and L. Josephs.

American Airlines Group Inc. (NASDAQ:AAL), Delta Air Lines Inc. (NYSE:DAL) and Southwest Airlines Co. (NYSE:LUV) followed suit: each of the three airlines plunged at least 7% over the two-day period.

Buffett loses on airlines as of Jan. 25

Figure 1 shows the closing prices from the past three days and the two-day price change for each of the airlines. Figure 2 shows Buffett’s current holdings in each airline.

Figure 1

Figure 2

Although Buffett only holds 28.21 million shares of United, Berkshire Hathaway Inc.’s (BRK.A)(BRK.B) position in United declined $338.82 million over the two-day period, the largest decline among the four holdings. Figure 3 shows the change in Buffett’s market value for each airline holding while Figure 4 shows the net loss from each holding.

Figure 3

Figure 4

Conclusions

GuruFocus Forum users debated on why Buffett invested in airlines. While airlines can offer good long-term growth potential due to increasing air travel around the globe, the competition on price can keep airfare prices low.

Disclosure: I do not have positions in the stocks mentioned.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


Rating: 3.0/5 (2 votes)

Voters:

Comments

dhonibabu
Dhonibabu - 6 months ago    Report SPAM

nice post admin

vidmate for blackberry

Please leave your comment:


Performances of the stocks mentioned by James Li


User Generated Screeners


mathew94CurrentInv
HOLKLSUQuick Look Group 2018 Late Sta
HOLKLSUEquity Income 2018 Group Late
HOLKLSULucky 20 Value 2018 Group Late
HOLKLSUTop 20 Group 2018 Late Stage S
HOLKLSUMini Group 2018 Late Stage Sec
Stefan.FockDown
bursaguru5Charles
HOLKLSUTop 20 Group Q3 2018 SHUT Sect
david.paige1stock%20screener%202.0
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK