Delta and Southwest sales bring Berkshire's stake below 10%

The sales don't necessarily mean Buffett is a long-term bear on the airline stocks.

VIEW IN BROWSER | SUBSCRIBE FRI, APR 03, 2020 WARREN BUFFETT WATCH Berkshire brings Delta and Southwest stakes below key 10% level Berkshire Hathaway sold slices of its stakes in Delta Air Lines and Southwest Airlines this week, but that doesn't necessarily mean Warren Buffett is losing his nerve as airline profits, and stocks, get battered by the coronavirus pandemic.   The sales executed Wednesday and Thursday, and disclosed late today, bring Berkshire's stake in both Delta and Southwest back below 10% of the carriers' outstanding shares. That's the level at which extra regulations kick in, which is why Buffett generally likes to keep Berkshire's stakes in the single-digit range.   In the larger of the two sales, Berkshire's stake in Delta went from 11.2% to 9.2% with its $314 million sale of almost 13 million Delta shares, about 18% of its holdings. The average selling price was $24.19 per share.   News of the sale, perhaps with some help from Delta's after-the-bell projection that Q2 revenues will be down 90%, sent the airline's stock down 11.5% to $19.90 in after-hours trading.   Berkshire's Southwest stake went from 10.4% to 9.9% with the $74 million sale of 2.3 million shares at an average price of $32.22.   Southwest fell 5.0% to $29.01 in after-hours trading.   Almost exactly a year ago, Buffett told our Becky Quick that he "accidentally" allowed Berkshire's Delta stake to top 10% because the airline did a big stock buyback. When he realized that had happened, Buffett said he "just decided to buy a whole lot more stock."   "Once I'd lost my virginity, essentially, I thought, 'Why stop at one?'"   One of the regulations affecting stakes of more than 10% that Buffett likes to avoid is the requirement that any buying or selling has to be disclosed within days. That's why we learned about these sales so quickly. Berkshire only has to reveal its under-10% stakes once every quarter.   To find out what else has been bought or sold, we'll have to wait until mid-May when Berkshire discloses its holdings as of the end of March. Coronavirus shuts down See's Candies Berkshire subsidiary See's Candies has furloughed all of its retail employees as of Wednesday this week after closing all of its 240 U.S. stores and "suspending production and shipping of product" on the advice of local health authorities as part of the battle against the coronavirus pandemic.     The confectioner said its only the second time in its 99-year history there's been an interruption like this one. The first was due to rationing during World War II. BUFFETT AROUND THE INTERNET Some links may require a subscription Bloomberg reports "Buffett-Backed BYD to Supply Electric-Car Parts to Rivals" Two days later, Bloomberg added "Buffett-Backed BYD Posts 42% Drop in Profit on Waning Car Demand" Andrew Bary writes for Barron's that "Warren Buffett's $10 Billion Bet on Occidental Petroleum Is Looking More Dicey"  In an opinion piece for MarketWatch, Brett Arends thinks "'Quiet' Warren Buffett has three ways to win in this market" BERKSHIRE STOCK WATCH         BERKSHIRE'S TOP STOCK HOLDINGS      Berkshire's top stock holdings by market value, based on today's closing prices. The number of shares held is as of December 31, 2019, as disclosed in the company's February 14 13F SEC filing.   The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.   LETTER TO THE EDITOR To the Editor:  As I read last week's Buffett Watch item on the recent performance of Berkshire Hathaway's stock portfolio, I was struck by the fact that 5 of the 10 biggest positions are bank stocks. Even for a very astute investor like Warren Buffett, I see it as a risky sector concentration. It's true that over the years, Buffett has generated exceptional profits from Berkshire's timely investments in financials like American Express (1964), Goldman Sachs (2008), and Bank of America (2011). However, as Jordan Wathen pointed out in his 2017 Motley Fool timeline of Buffett's bank buys, those investments were made when the bank, or the stock market, was in the midst of a crisis that gave Buffett the opportunity to get a great deal. Banking is a cyclical business. Given growing evidence the country is at the end of an extended business up-cycle and facing an unprecedented economic slowdown due to the coronavirus pandemic, Mr. Buffett and his shareholders may be taught an expensive lesson by not selling when the previous crisis was over. Although they are long-term holders, they will not be too happy if several years of gains are lost in a few months of 2020.   -- Steve Schoen, Independent Business Consultant   This letter has been edited for length and clarity. QUESTIONS OR COMMENTS Please send any questions, comments about the newsletter, and Letter to the Editor submissions to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)   If you aren't already subscribed to this newsletter, you can sign up here.   For information on how to protect yourself and what to do if you think you are sick, go to the CDC's Coronavirus (COVID-19) information page.   -- Alex Crippen, Editor, Warren Buffett Watch   Unsubscribe Manage Newsletters Terms of Service   Digital Products Feedback Privacy Policy   © 2020 CNBC LLC. All rights reserved. A property of NBCUniversal. 900 Sylvan Avenue, Englewood Cliffs, NJ 07632 Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes and Market Data and Analysis. Data also provided by THOMSON REUTERS