If you had invested $1,000 in airline stock when Buffett sold, this is how much you would have now

Wall Street legend and Berkshire Hathaway Inc. BRK-A BRK-B Director Warren Buffett surprised some investors in April 2020 when he bought Berkshire’s entire shares Delta Air Lines, Inc. BY, American Airlines Group Inc AAL, United Airlines Holdings Inc UAL and Southwest Airlines Co LUV near their lows from the COVID-19 market sell-off.

Buffett once said that investors should “be afraid when others are greedy” and “should only be greedy when others are afraid”. Nearly two years after Buffett dumped his stock in aviation, investors who were greedy when Buffett himself was scared have been rewarded by the market.

Related link: Wondering how to trade in a bear market? Here are 4 easy tips

Buffett reverses course: At Berkshire’s annual shareholder meeting in May 2020, Buffett said he had been wrong by investing about $4 billion in airline stocks to begin with.

“I just decided I made a mistake…in investing in the airline industry,” Buffett said. “It is a very difficult business. The future is much less clear to me how the business will turn out.”

Airlines and other travel stocks experienced a near worst-case scenario when the COVID-19 outbreak occurred in early 2020. Demand for travel dropped to near zero during the worst of the pandemic, leaving airlines in huge debt during the travel shutdowns. On March 27, 2020, airlines received $25 billion in federal bailouts and another $15 billion in government funding in December.

Ultimately, airline stocks were a leading driver of recovery in the second half of 2020 and into 2021 as investors anticipated the rollout of COVID-19 vaccines. The most recent data from Bank of America suggests that TSA throughput is now down just 26% from 2019 levels, and a recent Morning Consult poll found that 56% of current remote workers would like it to return to the office, another positive sign for the travel industry.

To buy the Airline Dip: At the moment, investors who bought major stocks of airlines the day Buffett announced his sale of the assets have done fairly well in trading. Here’s a look at how much $1,000 in each of the following airline stocks purchased on May 2, 2020 would be worth today, assuming reinvested dividends:

  • Delta: $1,646
  • American: $1,548
  • United: $1,611
  • Southwest: $1,531
  • Spirit Airlines Incorporated SAVE: $1,630
  • JetBlue Airways Corporation JBL: $1,622

For the record, Buffett said last year that he does not regret his decision to ditch the airlines.

“I don’t consider it a great moment in Berkshire’s history, but we also have more assets than any company in the United States,” he said.

Benzinga’s opinion: Any investor who bought a basket of airline stocks when Buffett sold has generated decent returns on those stocks so far, but there are at least two investments that have outperformed since then. Investors who put $1,000 in the SPDR S&P 500 ETF Trust SPY on May 2, 2020, today would have $1,633, while investors who had put $1,000 in Berkshire Hathaway stock on that date would have approximately $1,714 today.

Leave a Comment

Your email address will not be published.