Berkshire Hathaway has sold all its airline stocks because of the coronavirus pandemic, but Warren Buffett is telling investors they should still 'bet on America'.
The billionaire investor revealed the conglomerate has offloaded the entirety of its stocks in the US airline industry, waving goodbye to shares in United, American, Southwest and Delta Airlines, during the firm's annual shareholder meeting Saturday.
In the same meeting, Buffett urged investors to hold onto stocks in businesses they like and to 'never bet against America' despite the mounting concerns over the long-term impact the virus is wreaking on the economy.
More than 30 million Americans have lost their jobs since the outbreak began and gross domestic product plummeted 4.8 percentin the first quarter alone, officially plunging the US into its first recession since 2008.
The airline industry has been one of the hardest-hit by the pandemic as borders closed, the federal government banned flights to and from some nations and stay-at-home orders have left the few planes still operating empty of passengers.
Billionaire investor Warren Buffett revealed Berkshire has sold its roughly 10 percent stake in the four largest airlines because the 'world has changed'
Buffett confirmedBerkshire has sold its roughly 10 percent stake in the four largest airlines because the 'world has changed' for the industry.
Back in December, Berkshire owned upwards of $4 billion in airline stocks including 42.5 million or a 10 percent stake in American, 58.9 million or a 9.2 percent stake in Delta, 51.3 million or a 10.1 percent stake in Southwest and 21.9 million or a 7.6 percent stake in United.
'The world has changed for the airlines. And I don't know how it's changed and I hope it corrects itself in a reasonably prompt way,' he said during Saturday's meeting, often dubbed Woodstock for Capitalists, which was held virtually.
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'I don't know if Americans have now changed their habits or will change their habits because of the extended period.'
The chairman and CEO warned that the current downturn could have an impact on consumer travel habits going on far longer than the virus itself.
'I think there are certain industries, and unfortunately, I think that the airline industry, among others, that are really hurt by a forced shutdown by events that are far beyond our control,' he said.
'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 ...The future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves.''
The airline industry has been one of the hardest-hit by the pandemic as borders closed, the federal government banned flights to and from some nations and stay-at-home orders have left the few planes still operating empty of passengers
Berkshire has sold the entirety of its stake because the company doesn't like to simply 'trim positions'.
'When we sell something, very often it's going to be our entire stake: We don't trim positions. That's just not the way we approach it any more than if we buy 100% of a business. We're going to sell it down to 90% or 80%,' he said.
'If we like a business, we're going to buy as much of it as we can and keep it as long as we can. And when we change our mind we don't take half measures.'
Buffett went on to say that he likes the airlines, but that sometimes there are events 'on the lower levels of probabilities that happen' like the pandemic that mean investors need to change tact.
However, the financial guru offered up somewhat contradictory advice as he recommended investors hold onto stocks they like and continue to 'bet on America'.
'If you owned the businesses that you liked prior to the virus arriving... nobody's forcing you to sell,' he said.
A Delta agent in Atlanta airport in April. Berkshire has offloaded the entirety of its stocks in the US airline industry including in United, American, Southwest and Delta Airlines
'Stocks have an enormous advantage and... if you bet on America, and sustain that position for decades, you're going to do better than, in my view far better than, owning treasuries securities.'
Buffett said it is difficult to predict when and how the economy will recover as the US comes out of the other side of the crisis, but said investors should 'never bet against America'.
'We do not know exactly what happens when you voluntarily shut down a substantial portion of your society,'' he said.
He said in the last recession of 2008 'our economic train went off the tracks... This time we just pulled the train off the tracks and put it on its siding.''
'We may not know the answers to some very important questions for many years,'' he said.
But he urged investors to 'never bet against America and that in my view is as true today at it was in 1789, and even was true during the Civil War and the depths of the Depression.'
The stock market has been spirallng downward amid the pandemic, as businesses across many industries have taken a dramatic hit.
Last month, JPMorgan Chase analysts warned investors to get ready for a 'vicious spiral' twice as worse as that seen in the 2008 global financial crisis.
For airlines, a decade-long hot streak where the big players together earned tens of billions of dollars,bought new planes and hired thousands more workers was wiped out in a matter of weeks, when the pandemic ramped up.
Government flight restrictions and border closures aimed at slowing the spread of coronavirus ravaged the industry.
The stock market has been spiraling downward amid the pandemic, as businesses across many industries have taken a dramatic hit
Planes have been pictured abandoned on runways as airlines cut thousands of flights, planes that do take off have barely anyone on board and thousands of staff have been laid off or furloughed to try to keep the industry afloat.
American, United, Southwest and Delta all reported their first losses in years last month.
The major players reached an agreement with the US Treasury in April for$25 billion in government aid to pay workers and avoid massive layoffs.
But Buffett's own businesses haven't been immune to the pandemic either.
His comments came the same day BerkshireHathaway reported nearly $50 billion in losses in the first quarter, marking the greatest loss the company has ever suffered throughout its history.
The conglomerate said most of its more than 90 businesses are facing 'relatively minor to severe' negative effects from COVID-19, the illness caused by the novel coronavirus and now punishing the global economy, with revenue slowing considerably in April even at businesses deemed 'essential'.
The conglomerate – which owns companies including Geico auto insurance, Burlington Northern Santa Fe railroad, Dairy Queen and Duracel - said in a regulatory filing Saturday morning that before the coronavirus outbreak in mid-March many of its businesses were posting revenue and earnings increases compared to year ago.
However, the pandemic has led the BNSF railroad's shipping of consumer products and coal to fall, while Geico set aside money for car insurance premiums it no longer expects to collect.
Some businesses cut salaries and furloughed workers, and retailers such as See's Candies and the Nebraska Furniture Mart closed stores.