Warren Buffett has a storied history with airline stocks, once quipping, "I am Warren and I am an aeroholic." But the spectacular returns for the industry over the last year are casting a dark cloud on Berkshire Hathaway's decision to dump all of its airline holdings in May 2020 as prices were bottoming. Berkshire loaded up on stock of the four major U.S. carriers in 2016.
At the 2020 Berkshire annual shareholders meeting, Buffett said he'd spent $7 billion to $8 billion amassing stakes in Delta Air Lines, United Airlines, American Airlines and Southwest Airlines. He didn't comment on the exit prices except to say, "We did not take out anything like $7 [billion] or $8 billion." This contributed to Berkshire's massive $50 billion loss in the first quarter of 2020.
Since then the stocks have taken off, with American and Southwest up over 80% since their May 25, 2020 bottom, while United and Delta are up about 70%. Measuring gains from the May 25, 2020 trough of all four airlines produces even more spectacular results. United was up over 200% over the period, while American was up 190%.
The worst losses over the period, which aren't necessarily reflective of Berkshire losses in the positions, were palpable. United was down over 70% at the nadir, and both Delta and American had sunk over 60%. An investment that loses 70% requires a 333% gain to get back to breakeven.