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How to Avoid the High Fliers

Buffet Sells Airline Shares at a Loss, Calls Buy ‘Mistake’ 11 May 2020 12:18 PM

On Wednesday 6 May World of Aviation reported:
 

‘ Legendary American investor Warren Buffett has sold his entire airline holdings, worth $4 billion, in American, United, Delta and Southwest.
 

In a virtual address to Berkshire Hathaway shareholders, he called his recent purchase in the businesses an “understandable mistake”.

 

“ I don’t know whether two or three years from now that as many people will fly as many passenger miles as they did last year,” Buffett said. “ They may and they may not, but the future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves.”

 

Buffett is reportedly the world’s fourth-richest man, and his words are likely to cause significant damage to the airline business’ confidence…. “The world changed for airlines,” Buffett said. “It turned out that I was wrong about that business because of something that was not in any way the fault of four excellent CEOs.

 

But the companies we bought were well managed. They did a lot of things right. It’s a very, very, very difficult business because you’re dealing with millions of people every day and if something goes wrong for 1 per cent of them, they are very unhappy.

 

We made that decision in terms of the airline business. We took money out of the business basically even at a substantial loss. We will not fund a company … where we think that it is going to chew up money in the future.

 

Last week, American Airlines announced a $2.2 billion loss for the first quarter of 2020, and United $1.7 billion. “Never before has our airline, or our industry faced such a significant challenge,” American chief executive Doug Parker said.  “ We all expect that recovery will be slow and demand for air travel will be suppressed for quite some time.” 

 

Members of our ‘Investing & Online Trading’ Report who follow Jim’s lead would NOT have been invested in:


  1. ANY of the 4 American Airlines mentioned. I.e. American Airlines (AAL), United Airlines (UAL), Delta Airlines (DAL) and South West Airlines (LUV), NOR  in

  2.   Australia’s ’flying kangaroo’ (QAN) or Virgin Australia (VAH) - which is now in voluntary Administration. 

 

Using Jim's proven 'Weight-of Evidence' approach, here’s why:

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Jim Berg and John Atkinson are Authorised Representatives (AR Nos. 322724 and 1251439) and ShareTradingEducation™.com Pty Ltd (“STE”) is a Corporate Authorised Representative (CAR No. 322726) of Maven Capital Pty Ltd, Australian Financial Services Licence AFSL 418504. Examples from the Australian and USA markets are provided to demonstrate that Jim Berg’s principles may be used globally. This educational material is from an Australian source and complies with Australian law and not necessarily any other (local) law. Direct investing in the stock market can result in financial loss. STE products have been prepared for the general information of investors and do not take into account the investment objectives, financial situation and particular needs of any particular person. Persons intending to act on information in STE's products should seek professional advice to confirm that the investments or strategies mentioned are appropriate in the light of their particular investment needs, objectives and financial circumstances prior to taking any action. Refer also to the full Customer Caution Notice in our Terms and Conditions.