An Airline ETF to Hone in on Where Warren Buffett Finds Value

Those who draw inspiration from the deep-value investor Warren Buffett may take a look at an airlines sector-specific ETF as the investment guru loads up U.S. airline plays.

Warren Buffett’s Berkshire Hathaway Inc. boosted investments on Delta Airlines and Southwest Airlines in the second quarter, Bloomberg reports. He is now a major investor in the four biggest U.S. airlines.

Buffett has raised his stake in Delta up almost 19% to 63.7 million shares from the first quarter of 2018 from 53.6 million shares. Berkshire’s Southwest exposure also rose nearly as much to 56.5 million shares as of the June quarter from 47.7 million shares.

Berkshire had to diminish its stakes in American Airlines Group and United Continental Holdings to avoid surpassing 10% ownership in each of those companies, reflecting Buffett’s personal threshold that he didn’t want to cross.

“These buy and sell decisions did not reflect our investment management’s views as to the relative attractiveness of the bought and sold securities but were rather a response to the 10% limitation,” Berkshire said in a statement.

Airline Industry & Huge Revenues

The airlines industry is generating huge revenues through a number of methods, including loyalty programs. For example, Hawaiian Airlines grew at the fastest pace at 52% while American earned the most around $1.15 billion. According to a Stifel’s Joseph DeNardi report, growth in U.S. airlines’ loyalty programs was particularly robust in the first six months of 2018 compared to the same period last year.