원문 보기
Hey, what's going on you guys? Welcome back to the channel. Hope you're having a great day so far. So, in this video today, we are going to be talking about Warren Buffett selling his entire position in the airline industry, as well as doing an update on my M1 Finance dividend stock portfolio. Now, this news broke over the weekend.
I had a lot of people asking me what I planned on doing with my airline stocks. Am I buying more? Am I selling them? And it's not a huge part of my overall portfolio, but I have talked a lot about the airline stocks. I did a full video on American Airlines that did really well here on the channel. A lot of people are seeing the pessimism in the market surrounding the airline industry, and they're wondering, is it time to buy?
Those of us who have already purchased are wondering if they should follow Warren Buffett and run for the hills. So, that is going to be the main focus of this update here is what the heck is going on with the airline industry and my speculation as to why Warren Buffett sold his airline stake. Now, I own two airline stocks in this portfolio here, and in total, they are meant to make up 8% of this portfolio.
And that is Delta Airlines and American Airlines. And I am down quite a bit in these stocks. We'll take a look in a little bit here, uh but I don't have a ton of money going into these airline stocks, but they are one of the recent additions to my portfolio. Um as far as this portfolio here goes, the goal here is building up a $100,000 dividend stock portfolio.
And while these airline stocks aren't currently paying dividends, my thought process here is to sell them down the road for some capital gains and then invest that money across some dividend stocks. So, all of these stocks in this portfolio pay dividends except for American Airlines, Delta Airlines, and then Boeing stock.
Uh but my opinion is that there is a substantial opportunity here for capital gains, but that is just my opinion. Lastly, guys, I just want to say here that this is not any kind of financial advice. I am not a financial advisor, and you should always do your own due diligence before investing in anything out there.
All right, so let's talk about the big news here, and that is the fact that Warren Buffett has sold out of the airline business entirely, and this was a pretty substantial purchase for his holdings company known as Berkshire Hathaway, because prior to this sale, they had a roughly 10% stake in the big four or the major four airlines, which are Southwest, Delta, United, and American Airlines.
Now, in the past, Warren Buffett has said that he was not a fan of the business model of the airline industry, and he had not owned airlines uh for a long period of time. But in 2016, he did go back on what he said and began largely buying into the airline industry. Now, the main problem here with Warren Buffett's airline investment is the timing of this investment.
Now, nobody knew at all what was going to happen with this global pandemic, but as we're going to see in a little bit when we look at the share performance of these airlines, anybody who bought these airline stocks pretty much in the last 5 to 10 years or so, um bought at a price that is much higher than where the shares are trading today.
So, during this annual meeting with his shareholders, he broke the news that he sold entirely out of his airline position, and this was really kind of wild, because I'm going to show you guys in a second here, he literally just added to it back in March. So, he went from buying more airline stocks in March to entirely selling his position in May.
And right here is Warren Buffett's purchase here of more Delta Airlines that occurred in February and was reported in March. So, Berkshire Hathaway paid 45.3 million dollars on February 27th for roughly 1 million Delta Airline shares at an average cost basis of 4640 per share. Now, this was largely before that sell-off took place.
Uh Warren Buffett has lost a lot of money on these airline stocks. Uh but just for example, this position here, roughly a million shares at 4640 per share. If we take a look at Delta Airline stock, uh we can see where it's trading at today. And Delta Airlines is currently trading at around $22 per share, and we know that Warren Buffett paid about 4640.
So, he saw this initial dip here take place with Delta Airlines going from around $60 a share down to 46, somewhere around here. That's when he began purchasing, and boy was that poor timing because the sell-off continued. Uh and this stock is currently at just about $22 per share. So, essentially, Buffett called his purchase of the airline stocks an understandable mistake and explained he was selling out of the position entirely essentially based on this global pandemic that has crippled the airline industry that nobody saw coming.
He also has concerns about when airlines are able to open up, if they're operating at 70 to 80% of their normal uh traffic, there's going to be a lot of grounded planes and flights that are not full. So, he just has overall a vast concern of the airline industry over the next couple of years. And pretty much everyone now agrees it's going to be probably a 3 to 5-year process for things to get back to normal for the airline industry.
So, now let's jump over and take a look at how the airline stocks reacted to this news of Warren Buffett selling out of the industry. All right, so first of all, since it's up on my screen, we have Delta Airlines down about 9% today on that news. Over the last 3 months down 58% over the last 6 months down about the same, somewhere around 58%.
And over the last 5 years, the stock is down again about 50%. So, so this stock is down massively and another 10% today. American Airlines being the airline in the worst shape financially with massive amounts of debt. They are down again about 9% today. If we look here over the last 3 months, they are down 62% last 6 months somewhere around 65% and over the last 5 years down almost 80%.
United Airlines is also down about 9% today. And if we take a look here over the last 3 months, they are down 66% over the last 6 months down 71% and over the last 5 years, they are down 56% and then the highest quality airline here, Southwest, down a little under 8%. Over the last 3 months, they are down 50% somewhere around there.
Over the last 6 months, they are down close to 50 and over the last 5 years, they are down just 30%. So, in terms of the airline stocks, if you're buying individual stocks, you're going to want to consider American Airlines as the highest risk, but also highest potential return there based on the massive debt load this company has.
Southwest being your lowest risk, safest play here for airlines because they are the best managed company with the lowest debt load. There is a high degree of speculation with American Airlines based on that debt load. But the last thing I want to show you guys here, there's only one ETF out there for buying the airlines.
Um and this is not financial advice, but one thing that I would say here as a strategy for buying into the airline industry would be dollar cost averaging into a diversified ETF, and this is called the JETS ETF. So, the problem with the airline industry is nobody knows if these stocks are going to fall lower, is this the bottom, are they going to go higher?
Nobody knows for sure. So, you don't want to lump sum invest into the airline industry, but a strategy called dollar cost averaging would likely be your best bet where you're purchasing shares on a regular basis over a long period of time, and JETS is one way that you could accomplish this. So, here we have the JETS ETF.
It has 35 different holdings. It holds all of the major US airlines as well as some international airlines as well. And this is the only airline ETF out there uh that you can really invest in. The expense ratio is 0.6%. It's a little bit higher, uh but it's still not anything too crazy compared to some of the higher expenses you see.
You could obviously, if you wanted to, just buy the individual stocks or build this JETS portfolio within M1 Finance. But, if you want a pre-built option and it's worth the expense ratio, uh this is a diversified approach to the airline industry. If we take a look at the performance of this ETF, it's down about 7% today.
Over the last 3 months, it is down 55%. Over the last 6 months, down about 55 as well. And over the last 5 years, it is down about 43%. So, the advantage to the JETS ETF versus an individual airline stock is you're not susceptible to something that would happen to the one individual company. You own the industry as a whole.
So, let's say things get really bad for American Airlines and they go bankrupt. Well, if they ended up having their shares become worthless as a result, me as an American Airlines shareholder would get washed out. But if you own the ETF and only a portion of that money is in American Airlines, well, you're better off because you're diversified across 35 different holdings.
Now, lastly, before we get into my update on my portfolio, I want to share my thoughts as to why Warren Buffett sold his airline stake. And essentially, I think it just has to do with the timing. The majority of his purchasing was in 2016 and beyond. And if we take a look here at this chart here, let's figure he began purchasing somewhere around the middle of 2016, around here.
He was buying at around 22 to $25 per share, looking at the industry as a whole. Now, this also includes international airlines, which may skew it a little bit, but just looking at the industry as a whole through this ETF, shares were 22 to $25 and now they are $13. So, he's down around 40 to 50% probably um on his early investment.
And if he continued accumulating shares, the price kept getting higher and higher. So, uh nobody knows for sure how much Warren Buffett lost on these airline stocks, uh but it's probably in the neighborhood of 40 to 50% somewhere around there. And the issue he ran into is the fact that he couldn't justify holding on to this position for the next couple of years because it's probably going to be 3 to 5 years until we see the airline stocks trading back at these levels, maybe even longer.
Uh so, for that entire duration of 3 to 5 years, that is dead money for Berkshire Hathaway and he would have to justify this position to his shareholders and he just had no way of doing that. So, the main problem here is that he already owned a massive stake in the airline industry, about 10% of the big four.
So, when a position falls massively, you have basically two choices. Number one, you can just bag hold and hold onto that stock and see what happens. Or number two, you can average down by sizing up and building a larger position. But Buffett already owned 10% of the airlines, he probably didn't want to own much more and he couldn't justify putting more money into this industry.
So, based on that, according to, you know, my speculation here, my thoughts and feelings, I think he couldn't justify this position and based on buying it unfortunately at bad timing, which nobody knew this was going to happen, as a result of that, it just didn't make sense. There was no way to justify this position and he couldn't buy any more.
Now, that being said, if you don't already own the airline stocks, then it's probably a good time to buy for a three to five-year hold. You know, for a long-term investment. It could certainly go lower in the short-term, but if you look at where the airline stocks have traded over the last couple of years, these prices are quite low.
Not to say they won't go lower in the short-term, but if you don't own them already and you can load up on shares through dollar cost averaging at lower prices, then it's probably a substantially better opportunity than holding onto shares that were purchased somewhere in this range here. So, anyways, that's just my two cents on the airline stocks, guys.
I'm probably going to buy more. I might be looking into this JETS ETF in a separate portfolio. Haven't entirely decided on that yet, but I'm at the very least keeping my positions, potentially maybe even buying more. All right, so now I want to go ahead and do an update here on my portfolio. And I do have money going in today, my regular $2,500, which I invest in this portfolio every single week.
I also earned a dividend, I believe, so that's the $10.82. So, the first thing I want to do is jump over to my activity tab and go over some of the dividends that I earned here in the month of April. So, in April, I pretty much just had one dividend, which is unfortunately, you know, my thorn in my side here, General Electric.
Um they pay a dividend of 1 penny per share. I own 1,074 shares, so I earned a dividend of 1074, which is being invested across my entire portfolio. Other than that, I just had my normal purchasing here of $2,500 per week. Um and that accounted for, I think, uh $12,500 in the month of April since we had five Mondays.
So, if we look at the holdings tab here, I have a cost basis of 62,000, a value of around 52,000, and I'm down around $10,000 or about 15 to 16%. Now, as I've mentioned in my previous videos, the majority of my losses here are in General Electric, which is a position I've had since 2018. I ended up transferring this to this portfolio, and I just figured, you know, I've owned this for so long.
Um and this is what happens when you buy into a stock that falls massively. My average price here is 1415. I think General Electric is trading for like six or seven right now. You either have to bag hold, buy more, or sell it. I didn't want to buy any more cuz I already had a massive amount of money invested, so I said, "You know what?
Just going to hold on to it and see what happens." But this has been dead money in my portfolio now, you know, since 2018. So, of my roughly 10,000 in losses, 8,500 is in General Electric. So, I'm not down too much on the recent shares I've been purchasing. I will go ahead and sort this from the biggest winners to the biggest losers.
So, by far, my best purchase so far has been Lowe's stock. I'm up about 40% in this position. Uh and I think this is because people are just buying a more stuff from Lowe's and Home Depot because they are essential businesses. I know I've been there like a multiple times per week working on home improvement projects.
I'm up about 18% in Emerson Electric. I'm up about 7% in uh Coca-Cola. I'm up about 10% in Microsoft, about 7 and 1/2 in Apple, Genuine Parts Company up about three, and then National Grid, my utility stock, up 1%. And this is just from the standpoint of the share price. Keep in mind, these stocks here are all dividend payers as well, uh meaning I'm able to earn money from the dividends as well as that asset appreciation when I decide to sell these shares down the road.
So, then we have the shares here that I am down in. I'm down about 2% on Dunkin Donuts, but I've already earned dividends from that stock, so from the dividends I'm probably about break even. I'm down around 7% in IBM, down 16% in 3M. I'm only down 8% in Boeing. I've been able to buy shares uh through dollar cost averaging, and this is a large position in my portfolio.
Uh so, I've been able to buy it and pretty much get, you know, close to the market average for those shares. I am down about 15% in Walgreens, Delta Airlines and American Airlines down quite a bit, around 30 to 35%, and then of course, General Electric down 56%. So, that is what it looks like right now.
Didn't really earn too many dividends in the month of April, uh but we'll see what I earn for May, and I'll be contributing my normal $2,500 per week into this account. And as far as my allocations go, right now, the largest amount of money is flowing into Boeing and National Grid, uh just because first of all, I see Boeing personally as a long-term great buying opportunity.
And National Grid to me is a very safe investment during a recession since it's recession-proof. Uh so, that's why I'm directing a lot of money in there. Notice that General Electric is just at 4% of my portfolio. So, because I'm overweight, no new money is flowing into General Electric and I haven't purchased shares since 2018.
Other than that, I have 8% of my money going into these other stocks here: Duncan, Lowe's, Emerson Electric, Genuine Parts Company, Coca-Cola, IBM, Walgreens. And then I have 4% in 3M and 4% in General Electric for industrial exposure. I am overweight in both, but over the long term, that should normalize as more money is added.
I have 8% in tech here by having four in Apple, four in Microsoft, and then 8% in the airlines with four in Delta and four in American Airlines. So, anyways guys, that is my thoughts on Buffett selling his airline stocks. Um I'm personally going to continue buying. Like I said, I may look into that JETS ETF a little bit more personally.
Um and that's my update on my portfolio. We're not down too much if you uh you know, negate the General Electric position which I've had for the last couple of years. Uh most of the stocks I've been buying this year, I'm either up or I'm not down very much in those stocks at all. And I have confidence in this portfolio long term because it allows me to be paid in two different ways from market gains as well as dividends.
So, if you enjoyed this video guys, leave me a comment down below. And like I said, if you want to check out M1 Finance yourself, it's a commission-free brokerage that's great for dividend investing. I have a link to sign up below and I also have a free training that walks you through step-by-step how to get started with M1 Finance and build a portfolio.
I am affiliated with M1, so I may earn a commission in the process. But, thanks so much for watching, guys. I hope you enjoyed this video, and I will see you in the next one.
Comments 0