The Strategist

Buffett sells Wal-Mart, buys airlines

02/15/2017 - 14:36

Warren Buffett’s Berkshire Hathaway sold papers of Wal-Mart for $ 900 million, opting instead to invest billions of dollars in an airline. As a result, Buffett now has almost no Wal-Mart shares, while the largest US traditional retailer is seeking to catch up with Amazon and other online retailers.

Fortune Live Media via flickr, photo by Stuart Isett
Fortune Live Media via flickr, photo by Stuart Isett
Amazon’s market value now stands at $ 356 billion versus $ 298 billion of Wal-Mart. Last year, the investor admitted that traditional retailers are experiencing difficulties in competition with e-commerce giants. Buffett has shortened its stake in Wal-Mart Since then. 

Since the end of 2014, Wal-Mart’s share price has fallen by 21%, while Amazon’s shares soared 119%. Online sales of Wal-Mart accounted for only $ 13.7 billion in 2015, compared with $ 107 billion at Amazon. At that, WalMart still leads in total sales with $ 482 billion in revenue, which is four times higher than that of Amazon.

Bet on airlines

Berkshire Hathaway increased its stakes in various airlines in the IV quarter of 2016, according to the company’s reporting published on February 14.

The company purchased 43.2 million shares of Southwest Airlines for $ 2.15 billion, and increased its stake in Delta Air Lines by 848% up to 60 million shares worth $ 2.95 billion. The company also expanded its presence in American Airlines. Buffett kept buying airlines’ shares even after he called the sector a "trap for investors" during an annual meeting of shareholders in 2013.

Berkshire’s investment

Warren Buffett's company increased its stake in Apple's by 277% buying 42.1 million shares worth $ 6.64 billion. Buffett still holds the largest volume of funds in Kraft Heinz’s shares ($ 28.4 billion). Recently, the company also invested generously in Wells Fargo, Coca-Cola, IBM and American Express.

Apart from that, Berkshire Hathaway nearly quadrupled investment in Apple shares in the IV quarter. Strong growth of quotations of these securities since the beginning of 2017 could bring Berkshire more than $ 1 billion. Share of Buffett's corporation in the company is currently estimated at more than $ 7 billion, which makes Berkshire one of top ten owners.

At the end of Nasdaq trading on Monday, February 13, Apple’s paper was worth $ 133.29, an increase of almost 1% more than on Friday. This value was the highest by the time the trading closed. The previous record ($ 133) was noted in February 2015.

As a result, the company’s market cap amounted to about $ 700 billion. Capitalization of its closest competitor, Alphabet Holding, was just $ 100 billion less. There was a time when the owner of Google overtook the Cupertino giant, but now Apple extended the lead. 

Several major hedge funds and investors, such as George Soros and Carl Icahn, curbed number of Apple shares in their portfolios in recent years. On the other hand, Berkshire Hathaway increased its stake in Apple by 55% to 15 million shares in August last year.

If Buffett’s share did not change during first six weeks of 2017, this investment would earn $ 1.1 billion for him during this period, writes The Wall Street Journal.

Combined portfolio of Berkshire gained 15% in the IV quarter. At the same time, S&P 500 rose 3.3%.