When Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) CEO Warren Buffett can’t find clarity on a market sector, investing mortals like you and I should be extra-cautious. And right now, the Oracle of Omaha isn’t too sure about Delta Air Lines (NYSE:DAL) stock and its peers in the airline industry.
Notoriously, Buffett sold his massive stake in airline shares in May. At the time, he said that he “was wrong about that business.” Muddying the waters even further, Buffett admitted his uncertainty about the future of the airline industry.
“It’s a very difficult business. The future is much less clear to me how the business will turn out,” he said. Moreover, Buffett said, “We like those airlines but the world has changed … and I don’t know how it’s changed.”
If one of the world’s greatest investors doesn’t know, how are the rest of us supposed to make a decision on DAL stock? Without Buffett as our guidepost, are we all truly on our own now?
Let’s dig around and see if we can find some clues as there may yet be hope for clarity, if not certainty.
A Legend Stumbles
Since early May, when Buffett divested his airline shares, the stock market as a whole has rebounded sharply. Maybe it should have or maybe it shouldn’t. Either way, traders have to accept the market’s resilience even in the face of a global pandemic.
President Donald Trump recently provided commentary on the stock market’s sharp retracement. “If people didn’t get rid of stocks in their 401(k)s, they’re almost even. Think of it,” Trump said.
And there’s no denying that the airline sector’s recovery has been particularly swift. In fact, since the beginning of May, the four airline-industry stocks that Buffett dumped have each gained between 40% and 90% in value.
This isn’t to say that Buffett isn’t a terrific investor overall. Granted, he did err in selling his DAL stock near the bottom. But Buffett’s track record over the years speaks for itself. His wealth is massive and his reputation should remain untarnished among sensible investors.
Trump vs. Buffett?
Drilling down on the specifics of the stock-market rally, Trump mentioned the Oracle by name while referencing the rebound in airline stocks:
“Warren Buffett sold airlines a little while ago… He’s been right his whole life, but sometimes even somebody like Warren Buffett – I have a lot of respect for him – they make mistakes. They should have kept the airline stocks because the airline stocks went through the roof today.”
And DAL stock did indeed go “through the roof” on the fifth day of June. Specifically, the company’s stock added a full 5.5% of value in a single trading session. On the other hand, one day’s worth of price action isn’t Buffett’s chief concern. His favorite holding time, after all, is forever.
Moreover, the retracement in DAL stock isn’t yet complete. At the close of June 5’s trading session, the shares were priced at $34.16. That’s a far cry from the $50-to-$60 range that DAL shares had held from late 2017 until the onset of the novel coronavirus crisis.
In any case, there’s no need to try to fabricate controversy where it doesn’t really exist. There’s no real beef between Buffett and the president here.
“I’m not in the business of attacking any president, nor do I think I should be,” Buffett once declared and he appears to be sticking to that policy.
As for his ill-timed decision to sell DAL stock, it’s highly unlikely that Buffett’s losing any sleep over it. Planes will fly again and so will the shares, but Buffett doesn’t seem like the type of person to fret over missed opportunities.
The Takeaway on DAL Stock
If you’re already positioned in DAL stock, there’s no compelling reason to sell your shares unless you’ve already met your profit target. And as for the president versus the Oracle, controversy seekers will have to look elsewhere as there’s none to be found here.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.
