Warren Buffett, Berkshire Hathaway Inc. (NYSE:BRK.A) CEO, has once again trimmed his remaining Wal-Mart Stores, Inc. (NYSE:WMT) stock by almost 70%, leaving it to less than $1 billion in current valuation.
As Buffett becomes skeptical about the retail industry, he is shifting his focus to the airline industry.
Buffett’s Take on Wal-Mart
Buffett began slashing his Wal-Mart Stores stock in 2015 after the company lowered its financial guidance. Earlier this year, he recognized the fact that the retail giant is facing serious challenges competing with today’s biggest e-commerce company, Amazon.com, Inc. (NASDAQ:AMZN).
Investing in Airlines
In the third quarter, he has acquired new positions in American Airlines Group Inc (NASDAQ:AAL) for $797 million; in Delta Air Lines Inc. (NYSE:DAL) for $249 million; and in United Continental Holdings Inc (NYSE:UAL) for $238 million. Since the acquisition, Buffett has already realized a 21% return on the new stakes combined.
Buffett has also reportedly bought Southwest Airlines Co. (NYSE:LUV) shares last month.
Buffett’s surprising shift to the airline industry marks a reversal from his initial take on airline companies. In 2013, he considered the airline industry a “death trap” for shareholders.
In the past, Buffett believed that the industry only upholds unhealthy competition with highly volatile fuel costs, leading to a series of bankruptcies and turmoil.
“Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results,” he noted at the time.
George Hamlin, a Hamlin Transportation Consulting analyst, believes that Buffett might have perceived the airline industry in the US to be more stable than ever.
On Monday, Berkshire Hathaway advanced 0.76% to $236,650; American Airlines Group has surged 1.09% to $43.40; Delta Air Lines has increased 2.35% to $47.47; United Continental Holdings has improved 4.46%, and Southwest Airlines has gained 3.44% to $45.35. Meanwhile, during the said session, Wal-Mart Stores has declined 1.04% to $70.49; and Amazon.com has dropped 2.70% to $719.07.
