> Warren Buffett Blog: Buffett's airline stocks soaring sky high

Monday, January 9, 2017

Buffett's airline stocks soaring sky high

Buffett's Berkshire Hathaway disclosed in mid-November 2016 that it bought stakes in American, United Continental and Delta at some point during the third quarter.

On the same day as that filing, Buffett told CNBC that Berkshire also bought shares of Southwest in the fourth quarter. The Oracle of Omaha cited his friendship with Southwest co-founder, former CEO and chairman emeritus Herb Kelleher as a reason.

Since Berkshire's airline bets became public knowledge, shares of all four companies have been gaining in altitude. Delta (DAL) has risen 6%. American (AAL) is up 7%. Southwest (LUV) has soared nearly 13%. And United (UAL) has skyrocketed 14%.

Stocks often get a Buffett bump after Berkshire buys new stakes in them. Buffett is known as a consummate value investor, sifting through the rubble for bargains.

He's only recently begun to dip his toe into higher growth tech stocks -- and even there, Berkshire has limited itself to more mature (i.e. slower growth, gigantic and relatively cheap) tech companies like Apple, IBM and Verizon.

It's also worth noting that airline stocks took a breather last year after a couple of strong years, buffeted by terrorism fears, several high-profile technical glitches that led to major cancellations, rising jet fuel prices and a new round of fare wars sparked by discount carriers like Spirit (SAVE) and JetBlue (JBLU).

The airlines might be slowly getting back on track though. Delta reported on Wednesday that its passenger unit revenue -- a key measure of financial health for airlines -- was flat in December.