Berkshire raises stakes in airlines, Apple

Noah Buhayar
Bloomberg News

Warren Buffett’s Berkshire Hathaway Inc. sharply increased bets on airlines and iPhone maker Apple Inc. in the fourth quarter, while taking a stake in seed company Monsanto Co.

Berkshire’s investments in American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. climbed to more than $2 billion each, according to a regulatory filing on Tuesday from Buffett’s Omaha, Nebraska-based company. It also disclosed a stake in Southwest Airlines Co. valued at about $2.2 billion as of Dec. 31.

Taken together, the holdings represent one of the largest common stock investments for Buffett’s company in years. Berkshire first disclosed that it had invested in airlines in November, which came as a surprise to some, because the billionaire previously criticized the business.

“There has been massive consolidation in that industry," said Tony Scherrer, director of research at Smead Capital Management, which oversees about $2.1 billion including Berkshire shares. Buffett likes investing in businesses that have a durable competitive advantage, Scherrer said, and “it seems like airlines now offer that.”

American climbed 2.5 percent in extended trading at 6:04 p.m. in New York, while Delta rose 1.8 percent. United advanced 1.6 percent, while Southwest increased 1.3 percent. Apple shares were little changed.

Berkshire’s airline purchases were influenced, in part, by a presentation from American Chief Executive Officer Doug Parker, according to people familiar with the matterwho asked not to be identified discussing Berkshire’s strategy. Buffett said in November that Berkshire added Southwest shares after Sept. 30, without specifying how many.

Tuesday’s filing also showed that Berkshire more than tripled its Apple holding to about 57 million shares. The stake is now valued at more than $7 billion, making Berkshire among the top 10 holders of the Cupertino, California-based company.

The Monsanto stake was about 8 million shares and valued at more than $800 million. Bayer AG struck a $66 billion deal last year to take over the seed maker.

“I’m assuming he sees the same thing we do, which is that there’s a good likelihood the deal with Bayer will go through,” Chris Shaw, an analyst at Monness Crespi Hardt & Co. in New York, said by phone.

Buffett, 86, said last month that he’d been accelerating stock purchases at Berkshire, which he’s run for more than five decades. On Sept. 30, the company’s cash hoard hit a record $84.8 billion. It had been climbing in recent quarters because of profit from Berkshire’s dozens of subsidiaries and the redemption of securities that Buffett bought to fund deals.

Not all the picks in the portfolio are Buffett’s. In 2010, he brought on Todd Combs, a former hedge fund manager, to help him pick stocks. A year later, the billionaire hired another money manager, Ted Weschler. The filing doesn’t show which person is responsible for each investment. In general, the deputies tend to make smaller investments than their boss.

Buffett declined to discuss the rationale for the airline investments during an interview with Charlie Rose on Jan. 27, but he did say that the decision to buy was “in large part” his.

The billionaire further reduced his holding in Wal-Mart Stores Inc., cutting it to less than 2 million shares as of Dec. 31. That compares with more than 60 million in 2014. Buffett has said online retailers such as Inc. present an increasing threat to the big-box retailer.

Berkshire exited stakes in Kinder Morgan Inc., NOW Inc. and Deere & Co. A rout in crop prices has left some farmers too cash-strapped to buy new tractors from the company. Deere slipped 0.7 percent in extended trading.

Berkshire also reported owning about 167 million shares of Sirius XM Holdings Inc., valued at about $740 million at the end of 2016. The satellite radio provider is controlled by billionaire John Malone.

Shares of Sirius jumped about 3 percent in extended trading, while climbed 1 percent.

Even as Berkshire’s stock picks are closely watched by investors, they’ve become less important to the company’s overall performance. During the past two decades, Buffett has focused more on acquisitions than picking stocks.

Berkshire’s dozens of subsidiaries include auto insurer Geico, Dairy Queen, Fruit of the Loom and railroad BNSF. Early last year, Buffett completed one of his biggest acquisitions, the $37 billion buyout of Precision Castparts Corp., a supplier to the aerospace industry.