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Warren Buffett

Billionaire investor, Warren Buffett, who famously said in 1990 that he had made a mistake investing in airlines, just invested in airlines.

Speculation is that one of Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-BD) lieutenants, not Buffett himself, made the decision to invest.


What Got Bought

Whoever pulled the trigger, it has been confirmed that Berkshire Hathaway invested less than $500 million total in Delta Air Lines Inc. (NYSE:DALB) and United Continental Holdings Inc. (NYSE:UALA) stock. An additional almost $800 million investment was made in American Airlines Group Inc. (TSX:AALA).

Buffett told CNBC that Berkshire had also bought shares of Southwest Airlines Co. (NYSE:LUVC). The Southwest buy could not be confirmed since it did not appear on the latest Berkshire disclosure and Southwest declined to confirm an investment by Buffett.

What Happened Next

Immediately following the disclosure, American shares gained more than 3%. Delta and Southwest both rose more than 2% and United ended the day Monday up 1.7%.

The Berkshire buy in would likely be expected to push investor sentiment toward U.S. airlines even higher than the improvement that’s been seen so far this year.

Other encouraging factors include an indication from carriers that this year’s fare wars would likely ease up next year. In addition, cheaper jet fuel has led to more flights, another sign per seat revenue more swing positive in 2017.

What Got Dumped

The Berkshire Hathaway Inc. filing also disclosed that the fund reduced its Wal-Mart Stores Inc. (NYSE:WMTB) holdings by 68% in Q3. Wal-Mart’s pivot toward e-commerce, higher wages for workers and the company’s purchase of Jet.com were all seen as having a negative impact on profits.

Buffett had already sold some Wal-Mart shares earlier this year, making the Berkshire Hathaway stake now worth about $1 billion versus the almost $3 billion earlier this year. Buffett may have telegraphed his intentions at his shareholder meeting in April when he said traditional retail operations like Wal-Mart were having trouble competing with Amazon.com (NASDAQ:AMZNC).


How Airlines Have Performed

Meanwhile, with a substantial investment in airline stock a reality, it’s worth noting overall performance in the airline sector since it may have an impact on the future value of those stocks.

When it comes to on-time performance, among major carriers, Delta Air Lines came out on top with an on-time performance of 86.01%. That’s the good news for Buffett. The bad news is that another recent investment (not confirmed), Southwest came in dead last with an on-time performance rating of only 74.71%.

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