Warren Buffett’s firm sells nearly 13 million shares in Delta Airlines

In these unprecedented times, we are beginning to see a trend forming amongst investors in the international markets. Investor confidence is beginning to decay as Unemployment rates spike and companies begin to double down on liquidity solutions and slimming cost. Warren Buffett’s Berkshire Hathaway had reportedly sold $314 million USD of Delta Airways (NYSE: DAL) stock between the 1st and 2nd of April. The firm still owns a 10% stake in Delta Airlines, currently holding 58,900,759 shares in equity. The US airline is currently trading at half it’s value at the beginning of the year. The stock did rebound off the back of March in hopes of a recovery. However, recent news that the company is expecting a 90% revenue decrease in Q2 results sent the stock price downhill. In a recent statement by Delta Airways, the company is still burning through a whopping $60 million in cash a day!

A sign of Berkshire Hathaway Real Estate business in Vail, Colorado, USA

What does this mean for investors?

Now unless you are an eccentric millionaire/billionaire, I doubt you are looking to find a good entry price into Berkshire Hathaway (NYSE: BRK.A). However, Delta Airline investors may be in two minds after seeing the quick fire sale of $314 million. The recent news and poor Q2 outlooks were expected. This is one of the Big 4 US airlines that really is too big to fail. The Q2 forecasts do look concerning however according to CNBC Delta Airlines submitted an application to the Treasury Department for a government grant of $25 Billion. The grant will be on the grounds that the airline wants to refrain from cutting more jobs until the 30th of September. The stock price is likely to bounce around $20 or lower until Delta can produce some positive news on operations or an improvement on short term liquidity.

“Delta and our 90,000 employees want to thank Congress and the Administration for their bipartisan support as we navigate through the COVID-19 (coronavirus) crisis,” said Delta CEO Ed Bastian. “The aid provided in this government assistance package will go to directly support airline workers who will in turn help reignite the U.S. economy. We are committed to serving our people, our customers and our communities through this difficult period, and look forward to leading the recovery when we are past the crisis.” Ed Bastian Delta News 

Is this the opportune time to buy?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area. Now the last time Delta was trading at $20 or less was in July 2013. Most investors know Delta is at a good price. However the biggest risk is what lies ahead within the next 6 months. COVID-19 remains the big risk factor. If the virus lasts longer than expected, Delta Airlines could be looking at another big fall in stock price. In my opinion, at $22.48 the airline does hold some potential for long term cap gain. However, it would be naive to make short term evaluation of the company with such large unknowns at large. At Delta’s current price, I am currently looking for an entry below $16.40 (opinion from research). I can’t see the stock rebounding until we see “the light at the end of the tunnel” in regards to containment and improved investor confidence.

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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