If You Invested $1,000 in Airline Stocks During Buffett’s Sale, Here’s How Much You Would Have Now
Wall Street legend and Berkshire Hathaway Inc. BRK-A BRK-B CEO warren buffet surprised some investors in April 2020 when he sold all of Berkshire’s shares in Delta Air Lines, Inc. DAL, American Airlines Group Inc. AAL, United Airlines Holdings Inc. LAU and South West Airline LUV near their lows from the COVID-19 market sell-off.
Buffett said investors should be “scared when others are greedy” and “only greedy when others are scared.” Nearly two years after Buffett sold his airline stocks, investors who were greedy while Buffett himself was scared have been rewarded by the market.
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Buffett reverses course: At Berkshire’s annual meeting of shareholders in May 2020, Buffett said he was wrong to invest about $4 billion in airline stocks to start with.
“I just decided that I made a mistake … investing in the airline industry,” Buffett said. “It’s a very difficult business. The future is much less clear to me on how the business will unfold.”
Airlines and other travel stocks experienced a near worst-case scenario when the COVID-19 outbreak hit in early 2020. Travel demand fell to near zero during the worst of the pandemic , forcing airlines into massive debt during travel shutdowns. On March 27, 2020, airlines received $25 billion in federal bailouts and secured another $15 billion in government funding in December.
Ultimately, airline stocks were a key player in the 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 down just 26% from 2019 levels, and a recent Morning Consult poll found that 56% of current remote workers would be at home. comfortable returning to the office, another positive sign for the travel industry.
Buy Airline Dip: At this point, investors who bought shares of major airlines on the day Buffett announced his sale of the assets have done pretty well in the market. Here is a snapshot of the current value of $1,000 of each of the following airline stocks purchased on May 2, 2020, assuming dividends reinvested:
- Delta: $1,646
- American: $1,548
- United: $1,611
- Southwest: $1,531
- Spirit Airlines Incorporated TO SAVE: $1,630
- JetBlue Airways Corporation JBLU: $1,622
For the record, Buffett said last year that he didn’t regret his decision to get rid of the airlines.
“I don’t consider this a great moment in Berkshire’s history, but we also have more net worth than any company in the United States,” he said.
Benzinga’s opinion: Any investor who bought a basket of airline stocks during the Buffett sale has generated decent returns on those stocks so far, but there are at least two investments that have performed better since then. Investors who put $1,000 into the SPDR S&P 500 ETF Trust TO SPY on May 2, 2020, would have $1,633 today, while investors investing $1,000 in Berkshire Hathaway stock on that date would have approximately $1,714 today.