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Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) has purchased over $1 billion in airline stock over the last three months — despite Buffett’s famous criticisms of the industry in the past.
Buffett has repeatedly criticized the airline industry as a low-margin industry that requires a tremendous amount of fixed investment. “The airline business has been extraordinary. It has eaten up capital over the past century like almost no other business,” he famously said over a decade ago. He also said airlines are the best example of a business investors should avoid. “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, then earns little or no money. Think airlines,” he said.
His firm is reversing course on its view of the industry with the recent acquisitions. Among the new positions are shares in American Airlines (AAL), Delta Airlines (DAL) and United Continental Airlines (UAL), according to the firm’s filing with the Securities and Exchange Commission. Buffett’s position in American is the biggest, being over three times bigger than his stakes in the other airlines.
While Berkshire did not disclose the purchase, CNBC reports that the firm also bought shares in Southwest Airlines (LUV). Buffett told CNBC he bought shares in the company after Berkshire made its filing with the SEC, and he didn’t want people to think he was avoiding LUV for any reason.
The airline investments listed in the firm’s filing remain a small portion of Berkshire’s total portfolio, representing less than 1% of the company’s total assets under management.
In total, Berkshire bought $797 million in American Airlines stock, $249 million in Delta and $237 million in UAL. His stake in Southwest is uncertain.
