Buffett is selling - Signs not to buy airline stocks

The Dow Jones (DJI) has recovered 23% since its most recent drop and investors are wanting to maximize their investments as it rises. Naturally, many investors are looking into airline stocks because the airline industry is down over 50%. Buy low, sell high, right?

Maximize investments - Airlines aren't recovering fast

Recently, the Dow has been steadily increasing. Stocks have been gaining momentum and giving major returns on investments.

  • Carnival Cruise Line (CCL): +53% in one week

  • Goldman Sachs (GS): +32% in two weeks

  • Apple (APPL): +25% in two weeks

  • Delta Airlines (DAL): +12% in two weeks

  • American Airlines (AAL): +12% in two weeks

As seen from the list above, not all stocks are equal. Banking, technology, and cruise line investments doubled returns on investments compared to airlines. As financial movers, we must maximize our gains.

Buffett recently sold his airline shares

Warren Buffett, stock market guru, recently sold a large percentage of his airline shares. This comes as a major surprise because Buffett is notorious for encouraging investors to hold onto their investments during market meltdowns.

“Delta is burning more than $60 million in cash every day, we know we still haven’t seen the bottom,” Delta CEO Ed Bastian recently wrote in a memo to employees. “Without the self-help actions we are taking to save costs and raise new financing, that money would be gone by June.”

Following the memo, Buffett sold 13 million of his Delta shares between March 11 and 12. Buffett sold the shares for between $22 and $26 dollars and the share price is staying stagnant, currently at $23.23.

Airlines show zero buy signs

Just because airline shares are low doesn't guarantee they'll go high. Last Friday Delta said it expected quarterly revenue to drop by 90%. Following suit, JetBlue (JBLU) released a similar statement and American Airlines said they're losing $100 million per day in revenue.

  • Airline companies are asking for $50 billion from a government bailout, but it hasn't been promised to them yet.

  • Warren Buffett is selling his shares. Not a good buy sign.

  • Government imposed lockdowns are being extended and halting travel.

  • Airlines are continuing to lose money.

  • Delta CEO said, "we know we still haven’t seen the bottom.”

It may be attractive to take a risk on airlines and buy them cheap, but they aren't looking promising. Airline stocks may rise if they receive a government bailout, but until then, they're on track to go bankrupt. Other sectors in the market are seeing 25% gains or more, so why add extra risk to your portfolio by buying airline companies?

Just because they're down doesn't mean they'll go up.

Don't forget to register on the site to get access to our weekly podcast. Please, send us your investment questions through the contact form so we can answer them on our podcast!

DISCLAIMER: This site article does not contain financial advice. Any and all market analysis is solely the authors opinion.