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Buffett Says Better Economic Recovery Clouded Airlines Decision

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Katherine Chiglinsky
·2 min read
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(Bloomberg) -- Warren Buffett conceded that a better-than-expected economic recovery from the pandemic made the timing of some Berkshire Hathaway Inc. moves last year -- including its decision to drop some airline stocks -- more fraught.

Berkshire ended up dumping the stocks of four major U.S. airlines as the pandemic bore down on the country and paralyzed travel, a move that prompted questions from shareholders at the conglomerate’s annual meeting held virtually Saturday. Stocks of airlines including Delta Air Lines Inc. and Southwest Airlines Co., two of the carriers Berkshire had owned, then rallied more than 45% after the end of May through the rest of 2020, helped by unprecedented government stimulus measures.

“The economic recovery has gone far better than you could say with any assurance, so we didn’t like having as much money as we had in banks at that time,” Buffett said at the meeting in Los Angeles. “I do not consider it a great moment in Berkshire’s history, but also we’ve got more net worth than any company in the United States under accounting principles.”

Buffett’s move to dump the airlines was driven in part by the carriers’ need to receive aid as the pandemic shut air travel. The billionaire investor explained that the carriers might have had a harder time getting help if Berkshire had been a significant shareholder.

“They might have very well had a very, very, very, very different result if they had a very, very, very rich shareholder that owned 8 or 9%,” Buffett said.

Buffett’s been criticized in recent years for his ever-growing cash pile that hit a near record $145.4 billion at the end of the first quarter. Shareholders on Saturday questioned why he didn’t seize more during the market’s bottom last year, taking advantage of low prices to deploy some of that war chest. He noted that Berkshire needed to manage its own risks and couldn’t depend on anybody for help. Charlie Munger, a Berkshire vice chairman, also noted it’s “insane” for people to assume that money managers can pinpoint the market bottom and take advantage of it.

“There always is some person who does that by accident, but that’s too tough a standard,” Munger said. “Anybody who expects that out of Berkshire Hathaway is out of his mind.”

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