Trump: Buffett made a rare mistake when he sold airline stocks

During a news conference celebrating this morning's government data showing an unexpected increase in employment last month, President Trump said that while Warren Buffett has been "right his whole life," he made a mistake in April when Berkshire sold all its shares of the country's four largest airlines after they were battered by the COVID-19 pandemic.

"Sometimes even someone like Warren Buffett -- I have a lot if respect for him -- they make mistakes. They should have kept the airline stocks because the airline stocks went through the roof today."

Trump was comparing Buffett to the economists who had predicted May employment would drop ... usually correct but not immune to sometimes getting it wrong.

When Buffett revealed at this year's annual meeting in early May that Berkshire had liquidated roughly $4 billion of shares in American, Delta, Southwest, and United, after buying them for "somewhere between" $7 billion and $8 billion starting in 2016. 

Buffett said then that while he didn't blame the carriers' managements, "the world has changed for the airlines," due to the sharply reduced air travel prompted by the pandemic, introducing a lot of uncertainty into an industry he thought would benefit over the long term from increased pricing power fueled by consolidation.

"I don't know whether Americans will have now changed their habits, or will change their habits, because of an extended period, if it happens, that we're semi-shut down in the economy."

He also predicted each carrier would have to borrow around $10-$12 billion, money that will have to be repaid from future earnings.

And even if business comes back 70 to 80%, "the aircraft don't disappear, so you've got too many planes."

So far, Trump has has the edge. Calculating from the dates that Berkshire completed selling shares of each airline, as listed in SEC filings, American is up 64%, Delta has gained 54%, Southwest is up 27%, and United has increased by 53%.

Buffett, of course, has a much longer time period in mind.

I've put a note in my calendar to check back in a year.

Reader question: How much has Berkshire paid for its stocks?

Kyle emails, "Where can you see what Berkshire bought a stock at? Like for example, what was his purchase price of Apple?"

We generally don’t know precisely what the purchase price, or cost basis, is for most stocks in the Berkshire portfolio.

We do know, based on 13F filings each quarter, how many shares of each U.S. publicly traded stock were purchased during that quarter. You can use an average price during those three months, or the low price, or the high price, as you prefer, to get a rough estimate of the cost basis for shares added during the quarter.

For the largest positions in Berkshire's portfolio, we have an even better source: the total purchase price is listed in Buffett’s annual letter to shareholders.

For example, in the 2019 letter on page 10, Buffett lists the cost basis for Berkshire’s 15 largest common stock investments as of the end of the year. (It's in millions of dollars, so add six zeros. American Express, for example, is $1.287 billion.) 

BUFFETT AROUND THE INTERNET

Some links may require a subscription

BERKSHIRE STOCK WATCH

BERKSHIRE'S TOP STOCK HOLDINGS 

Berkshire's top stock holdings by market value, based on today's closing prices. The number of shares held is as of March 31, 2020, as disclosed in the company's May 15 13F SEC filing, except for Bank of New York Mellon, which is as of April 8, 2020 and U.S. Bancorp, which is as of May 12, 2020.

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

If you aren't already subscribed to this newsletter, you can sign up here.

-- Alex Crippen, Editor, Warren Buffett Watch