Airlines carry a lot of discretionary travel, eg. for vacations. That can crater in bad times. I think Mr. Buffet likes to invest in things less subject to disruptions.
My 2 Cents. Warren prefers to invest or own companies that have wide moats (ex: Coca Cola-iconic brand/NVE-local utility monoply) in investing parlence.
BNSF's wide moat is that is owns half of the western US long distance rail routes, and a large portion of the rail freight, just by its physical presence. No one can come in and build a railroad paralleling BNSF's long distance routes in 2020.
Airlines have much narrower moats. Many cities have multiple airports and airlines don't have to own the airspace that they travel through.
BNSF typically turns between 20% and 25% of its revenues into net income for its owner. While not the same profit margin as a tech company, it is still a very good annual return that companies in many other industries would love to have.
For all of 2019, BNSF earned $5.481 billion net income on revenues of $23.515 billion, or 23.3% of revenue turned in to income.
In 1st Quarter 2020, BNSF earned $1.190 million net income on revenues of $5.417 billion, or 22.0% of revenue turned in to net income.
As to airlines, the old saw goes:
"How do you make a little money in the airline industry? Start with a lot of money."
samfp1943 On 05/03/2020 articles on both Television, and in-print began to appear; that Berkshire Hathaway had jettisoned ALL of its Airline Holdings. The cause was pointed mainly, at the effects of the current Viral Pandemic, on airline travel. A linked article @ https://www.breitbart.com/economy/2020/05/03/warren-buffets-berkshire-hathaway-sells-full-slate-of-u-s-airlines-investments/ ~SNIP~
On 05/03/2020 articles on both Television, and in-print began to appear; that Berkshire Hathaway had jettisoned ALL of its Airline Holdings. The cause was pointed mainly, at the effects of the current Viral Pandemic, on airline travel.
A linked article @ https://www.breitbart.com/economy/2020/05/03/warren-buffets-berkshire-hathaway-sells-full-slate-of-u-s-airlines-investments/
~SNIP~
You would do yourself a service and read from a more reliable Wall Street analysis media outlet than from breitbart so I would suggest anyone commenting read this article on fool.com first: https://www.fool.com/investing/2020/05/03/warren-buffett-dumps-berkshire-airline-stocks.aspx That also explains the how and why B H got into owning airline stocks in the first place and the reason why he actually sold all of his holdings.
10% may make you a major stockholder, but it isn't a controlling interest.
10% of outstanding stock in an airline with hundreds, if not thousands of other owners, is a bit more than a bit player.
rrnut282why would he dump the BNSF stock? It still made money, just not as much as last qtr. The airlines, in comparision, were losing millions per day, until they started parking their fleet and reducing the number of flights. They do not have a rosy outlook for the rest of the year. Railroads, while down, might eke out a small profit this year, if we re-start things sooner rather than later.
Berkshire-Hathaway had been a 'bit player' in the airline stocks they held. In BNSF they are the sole owner. Big Difference
Never too old to have a happy childhood!
why would he dump the BNSF stock? It still made money, just not as much as last qtr. The airlines, in comparision, were losing millions per day, until they started parking their fleet and reducing the number of flights. They do not have a rosy outlook for the rest of the year. Railroads, while down, might eke out a small profit this year, if we re-start things sooner rather than later.
NO
FTA:"...[Warren] Buffet revealed the news to shareholders on Saturday, according to a Reuters report, which included that the conglomerate had some $7 to $8 billion invested in the airline industry:
Berkshire Hathaway Inc (BRKa.N) sold its entire stakes in the four largest U.S. airlines in April, Chairman Warren Buffett said Saturday at the company’s annual meeting, saying “the world has changed” for the aviation industry.
The conglomerate had held sizeable positions in the airlines, including an 11% stake in Delta Air Lines (DAL.N), 10% of American Airlines Co (AAL.O), 10% of Southwest Airlines Co (LUV.N) and 9% of United Airlines (UAL.O) at the end of 2019, according to its annual report and company filings..."
Then in the May 3rd TRAINS Newswire: "BNSF's first-quarter profit slides because of pandemic" by Bill Stephens;
FTA:"...OMAHA, Neb. — BNSF Railway’s first-quarter revenue and profits declined as traffic volumes sank due to the COVID-19 pandemic, the railroad’s parent company, Berkshire Hathaway, reported on Saturday.
BNSF’s pre-tax income declined 4.9%, to $1.6 billion, as revenue declined 6%, to $5.4 billion. The railroad’s operating ratio improved 0.6 points to 65.9% as expenses fell 6.7% in the quarter.
“BNSF’s service, velocity, and cost performance improved significantly in 2020 compared to the first quarter of 2019, when severe winter weather and flooding on parts of the network negatively affected revenues, expenses, and service levels,” Berkshire said in its regulatory filing..."
In a couple of other broadcast resources, it was mentioned but not 'sourced' that B/H's saler was a "Sell High, Buy back LOW" stock manoever (?) It was also mentioned that there were Chinese buyers(?) who were waiting in the wings to pick up some good buys(?)
Which brings us to the BNSF; also a victim of the current pandemic 'situation'...Since BNSF is a 'sole property, owned by B/H; Is it now on the auction block?
If the 'Chinese' were active in the Airline stock business; one has to wonder. How would they feel, about getting a major ClassI line in this country, at a 'fire sale price'? They seem to have access to a sizeable bankroll, and they are hot after other countries to participate in their big " Silk Road, building exercise"
Any ideas how this airline stock sales will work out?
How about: BNSF, if it goes to market?
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