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Hop on Warren Buffett’s “Deathtrap” and Die Rich

Thursday, November 17, 2016 8:16
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This post Hop on Warren Buffett’s “Deathtrap” and Die Rich appeared first on Daily Reckoning.

Last week we dodged protestors in the street, saw the FANGs drop, and even witnessed a historic market rally.

But there was something else going on…

The world’s most famous billionaire investor was hatching a plan. As it turns out, Warren Buffett is earning his pilot’s wings. His own Berkshire Hathaway just tossed almost $1.3 billion at three major airline stocks…

As soon as the SEC filings hit, our gears started spinning.

What’s Warren up to? Why’s he buying airlines?

Buffett is no accidental billionaire. He might smile for the cameras between sips of Cherry Coke—but he always has a cutthroat plan in the works. Sure, ol’ Warren comes off as a folksy, salt-of-the-earth Midwesterner. But it’s his job to outsmart the herd of investors who hang on his every word.

That’s why we should ignore what he says—and carefully watch how he operates.

These new airline purchases are the perfect proof. As recently as 2013, Buffett claimed the major airlines were downright terrible investments…

“When Delta Airlines was trading below $20 a share, billionaire Warren Buffett dismissed airlines as a place where his conglomerate Berkshire Hathaway would invest, stating at a May 2013 annual shareholder meeting the sector has ‘been a death trap for investors,’” Forbes notes. “Now, with Delta trading at far higher prices, Berkshire Hathaway is buying the stock and its peers, American Airlines, United Continental Holdings and Southwest Airlines.”

Now, more than $1 billion invested in American Airlines, as well as smaller positions in Delta and United means Buffett and Berkshire have changed their tune…


Should we expect more upside from the airlines now that Buffett is onboard?


Airlines are some of the strongest stocks on the market right now. Also, Buffett does possess a pretty good track record when it comes to unexpected transportation investments…

In 2007, Berkshire took a keen interest in railroad stocks. Much like Berkshire’s recent airline buys, Warren’s posse built a position in several major railroads.

That’s where it gets interesting…

In 2009, Buffett sold all of his stock in railroads and purchased the BNSF Railway. It cost him a mere $26.2 billion. And by 2014, Uncle Warren had collected over $15 billion in dividends alone.

But wait—there’s more…

Buffett bought BNSF right before the shale boom ramped up out west. The railways now had more crude than they could carry. And it was great for business. After Buffett’s takeover, BNSF has quadrupled in value.

Does this mean Buffett’s going buy one of these airlines for himself down the line? It’s hard to say—but I wouldn’t rule it out.

In the meantime, it’s safe to say airlines are set up to see a healthy and long awaited bump. Even though we didn’t know it, we’ve been flying high with Buffett since early September when we picked up shares of United Continental Holdings (NYSE:UAL). You’re up almost 25% on this trade so far. And we can expect more gains as this stock ramps higher into December.

Hop on the deathtrap and bank some gains as airlines soar…


Greg Guenthner
for The Daily Reckoning

P.S. The truth is in the chart — sign up for my Rude Awakening e-letter, for FREE, right here. Never miss another buy signal. Click here now to sign up for FREE.

The post Hop on Warren Buffett’s “Deathtrap” and Die Rich appeared first on Daily Reckoning.

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