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Warren Buffett Reverses Course, Buys Airline Stock

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Buffett invests in airlines

Activist investor Warren Buffett’s Berkshire Hathaway (BRK-B) submitted its 13F filing on Monday, November 14. Although this routine filing is read and tracked by many investors, Monday’s filing attracted more interest than usual.

Berkshire Hathaway’s (BRK-B) 13F revealed Buffett’s new investments in the airline sector—one he had written off for the past decade. Buffett, the conglomerate’s CEO, bought three airline stocks in 3Q16.

Berkshire Hathaway invested almost ~$800 million in American Airlines (AAL), as well as ~$300 million each in Delta Air Lines (DAL) and United Continental Holdings (UAL). After the filing, the conglomerate also invested in Southwest Airlines (LUV).

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Still a small investment

These stakes form less than 1% of Delta Air Lines’s shares, 1.4% of United Continental’s shares, and 4.2% of American Airlines’s shares. Together, the three airlines form just 1% of Berkshire Hathaway’s portfolio.

This has some investors speculating that the investment might have been selected by two of the firm’s portfolio managers, Ted Weschler and Todd Combs. Buffett typically handles the company’s big investments. These major investments and their portfolio weights include:

  • Kraft Heinz (KHC): ~22.6%
  • Wells Fargo (WFC): 16.5%
  • Coca-Cola (KO): 13.1%
  • International Business Machines (IBM): 9.5%

Other aviation and transportation interests

Berkshire Hathaway (BRK-B) owns approximately 90 companies. Many of its investments are in the transportation and aviation space, given Buffett’s long-standing bullishness on the US economy. These include BNSF Railway Company, NetJet’s private jet unit, and training company FlightSafety International.

On January 29, 2016, Berkshire Hathaway also acquired Precision Castparts, an aerospace parts manufacturer, for $32.7 billion—its largest-ever acquisition.

For further insight, please read The Airline Industry’s Cyclical Nature Is a Mixed Blessing. Investors can gain exposure to airlines through the iShares Transportation Average ETF (IYT).

In the next article, we’ll discuss Buffett’s well-known aversion to airline stocks.

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