It’s been announced by me more than once…Warren Buffett said the world has changed because of the COVID-19 and that he had been wrong to invest in the airline industry. As a result, his company sold its stake in American airline companies which consisted: 11% stake in Delta Air Lines, 10% of American Airlines, 10% of Southwest Airlines, and 9% of United Airlines.
Michael Brush, a financial writer said that Buffett made a mistake when he sold his airline shares because airline executives were confident in the industry’s recovery prospects and were backing up that confidence by buying companies shares.
Even President Trump chimed in this past week. President Trump held a press conference on Friday at 10 AM to talk about the job numbers. But he also took a moment to call out Warren Buffett. He said Buffett sold the airlines a while back and although he’s been right his whole life, he made a mistake because the airline stocks went through the roof. The airlines have been on fire since Buffett sold them. On Friday, United, Delta and American Airlines were up 16.8%, 10.4% and 21%, respectively alone on Friday.
This past week, money manager Ken Fisher recently said Warren Buffett is getting too old and too cautious in his old age for sitting on the sidelines during the coronavirus crisis. Ken estimated investors would have reaped a 20% gain if they simultaneously bought shares in U.S. companies in weak financial shape.
And now, Dave Portnoy want a piece of Buffett too.
On Monday, Portnoy slammed Berkshire Hathaway’s BRK.A, -6.78% BRK.B, -7.04% Warren Buffett for unloading airline stocks as the coronavirus epidemic took its initial toll. He also went off on how he made almost $300,000 on the day but missed out on an even bigger number by getting out too soon.
“I’m just printing money,” Portnoy said. “Why take profits when every airline goes up 20% every day. Losers take profits. Winners push the chips to the middle. ... I should be up a billion dollars.”
After Portnoy’s tweet spread across Finance Twitter TWTR, -6.00%, he doubled down on his Buffett bashing on Tuesday, calling him a “washed up” investor who’s no longer relevant.
“I’m not saying I had a better career. ... He’s one of the best ever to do it,” he said. “I’m the new breed. I’m the new generation. There’s nobody who can argue that Warren Buffett is better at the stock market than I am right now. I’m better than he is. That’s a fact.”
All makes sense, in the past three weeks, we have seen the airline stock go up on average 80%. I believe it was last week where United Airlines rose 50% in just three trading days. But I have a feeling Buffett might get the last laugh.
So what does Barstool Sports actually do? According to their website, Barstool Sports is a sports & pop culture blog covering the latest news and viral highlights of each and everyday.
Earlier this year, Penn National Gaming finalized its purchase of Barstool Sports late Tuesday, valuing the company at a whopping $450 million. The regional casino operator will immediately buy a 36% stake in Barstool for $163 million in cash and stock, according to the Wall Street Journal. Three years later, the company will pay an additional $62 million to increase its stake to 50%.
So why would Penn National Gaming buy Barstool? Well, Penn National, owns various casinos and hotels around the US and thinks Barstool’s brand could bring traffic to its casinos and its not yet online betting app.
Last month, Penn National Gaming announced their quarterly earnings. The company reported earnings of $0.06 per share vs expectations of $0.20 per share. This compares to a year ago when they earned $0.37 per share.
And I anticipate things will be worst for Penn National moving forward. Because of COVID-19 and social distancing, like all other businesses it will take a long time before demand hits pre-virus levels. Now years ago, Penn National spun its real estate into a REIT. So instead of owning the land, they now have to pay a lease. If their revenue isn’t high enough, they will be in more trouble than the other casino companies due to lease liabilities.
We are already seeing a second wave of COVID-19 cases and Fall isn’t even here. Hell, Summer isn’t even here. So maybe, just maybe, when Penn National can’t get funding, maybe just maybe, Penn National and Dave Portney, will be begging Buffett for a loan. Any maybe, must maybe, Buffett will treat Penn National, like he did Goldman during the Great Recession where he made bank over the next several years. So hypothetically speaking, maybe, just maybe Buffett will have the last laugh.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advice. Do your own research before making investment decisions.
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Good stuff. I didn't see or read Buffett's longer term plans regarding the airlines, but I imagine once things start to turn around again, airline stocks will come right back. They (Central Banks) will print enough money and throw out enough stimulus out there to prop up stock prices again, they always do. Eventually it will stop working of course, but I don't think we are at that point yet. Buy the dips!
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Great comment, don't fight the FEDS, but if the demand isn't there and because the airline is such a capital intensive business, at some point, the debt is going to catch up to entities and governments. But until then...like you said...buy the dips.
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Any claims of "beating Buffett" with relatively small amounts of money over relatively short periods of time are just ridiculous. Buffet is about consistent, low risk gains with billions of dollars over decades. If you invested billions 30 years ago, then you can compare yourself to Buffett.
Otherwise, it doesn't mean you're not a good trader/investor, it's just that you're playing a different game than he is, so you can't compare the two.
Buffett continues to be a sniper and is just waiting for the right kill...with over $125 billion in cash, he's itching to put it to work, but in no hurry at the same time.
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Very interesting article. I definitely see the heat on Buffet. But I agree that he’s been there and done that so to speak and time usually bears him out. This short term surge in airline stocks is definitely a good solid gain for people who buy the dips and sell the crests, but that’s never been Buffets game. He traditionally buys for the long haul, but if something looks like it has only short term legs he usually isn’t interested. He may yet get the last laugh and it would be pure poetry if it plays out as you have described.
Good Post.
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Because of his strategy of buy and hold, it's good he is thinking about his succession plan so Berkshire continues w/o missing a beat.
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