Airline stocks surge after Warren Buffett says he's open to buying one

Friday, 02 Mar, 2018

During his Monday interview, Buffett said Apple has an extraordinary consumer franchise and a strong ecosystem. That theme remains steadfast in the Berkshire culture even with $116 billion in cash and rock-bottom prices for debt.

'Berkshire's goal is to substantially increase the earnings of its non-insurance group [of companies],' he said. There is no one more important to us than the shareholder of limited means who trusts us with a substantial portion of his or her savings. The letter said the company had stock holdings totaling $170.5 billion in value at the end of 2017.

Warren Buffett believes long-term investors should buy stocks over bonds. It was also short on faulting excesses of Wall Street and Washington, and said nothing about Berkshire's plan to create a healthcare company with Inc. and JPMorgan Chase & Co. Now that the stock is trading around $15 per share, Buffett said he's in a position to write a check to acquire the whole company - although he said he doubts the company is looking to sell itself in the first place.

Also helping Berkshire will be the recent cut in the US corporate income tax rate, which gave Berkshire a one-time $29.11-billion net income boost by reducing its potential tax bill on stocks it owns.

Still, Buffett assured stockholders, "The $65 billion gain is nonetheless real - rest assured of that".

But he has given himself and long-time vice-chairman Charlie Munger, 94, more freedom to focus on investing and allocating capital.

"I think nearly anybody can draw [on the] lessons from Warren's achievement at Berkshire".

He drinks Coca-Cola and eats at Dairy Queen, presumably in part to promote the stocks and companies owned by Berkshire Hathaway.

"Berkshire's blood flows through their veins", Buffett wrote.

Shanahan said it also would have been nice to read Buffett's thoughts on why he is selling off Berkshire's IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

Book value per Class A share, which reflects assets minus liabilities and which Buffett considers a good yardstick for Berkshire's intrinsic worth, also benefited from the tax cut, rising 13% in the fourth quarter to $211,750.

He noted that Berkshire didn't go on a buying "frenzy" and acquire a bunch of companies previous year, mostly because there were no desirable options that came at a "sensible" purchase price.

"It is a awful mistake for investors with long-term horizons - among them, pension funds, college endowments and savings-minded individuals - to measure their investment "risk" by their portfolio's ratio of bonds to stocks", Buffett wrote.

Berkshire Hathaway already holds about $200 billion worth of airline stocks in its portfolio. That was almost double the previous year's $24.1 billion, or $9.76 per B share, because of the effects of the tax law.