Not only is Buffett clearing aviation stocks, but the “Chinese stock god” has stepped on the thunder too! The moat turned out to be so fragile

Duan Yongping, who has created brand myths such as “Xiao Ba Wang”, Backgammon, OPPO, vivo and so on, once claimed that “I made more money in investment than I have earned in 10 years in the industry”, and has the title of “China Buffett” in the industry. He himself is also a loyal “fan” of Buffett.
At this year’s shareholder meeting, Buffett suddenly stated that he had cleared out the “beloved” aviation stocks, and the investment circle was in an uproar.
The “share god” position in the sector has always received much attention from the market. This sell-off may cause the share price of aviation stocks to fall. Fans who invest in aviation stocks under the influence of Buffett are also likely to face losses.
In early April, investment tycoon Duan Yongping was influenced by Buffett to buy aviation stocks, and he may also face “stepping on the thunder”. He said bluntly, “(Buffett) selling at this time is equivalent to putting fans in.” It can also be regarded as “seeing you for a long time.”

Buffett had previously said that he would not sell aviation stocks
Investment tycoon Duan Yongping is affected by its influence
At this year’s shareholder meeting, Buffett admitted that he made an “understandable error” when evaluating airline stocks and said he had cleared aviation stocks. Before that, his attitude towards aviation stocks has always been relatively positive.
Since buying aviation stocks in 2016, Buffett has held and optimistic about aviation stocks for many years. According to Buffett’s letter to shareholders in 2019, as of the end of December 2019, the total market value of Berkshire Hathaway’s aviation stocks was at least more than US $ 6.667 billion, equivalent to about RMB47.1 billion.
Among them, Berkshire Hathaway held a total market value of Delta Air Lines shares of 4.147 billion U.S. dollars, a total cost of ownership of 3.125 billion U.S. dollars, and a floating profit of more than 1 billion U.S. dollars; its total market value of Southwest Airlines ’shareholding was 25.20 The total cost of US dollars is 1.94 billion US dollars, and the floating profit is close to 600 million US dollars.
In the fall of US stocks at the end of February this year, Buffett also copied the aviation stocks he has always been “beloved” with an average transaction price of US $ 45 per share and a total investment capital of around US $ 45.3 million.
In mid-March, Buffett also insisted that “will not sell airline stocks.”

Buffett’s “backing up” also made many loyal fans start thinking about investment opportunities in aviation stocks. On April 19, investment tycoon Duan Yongping said on Snowball that he began to pay attention to aviation stocks because of Buffett and purchased some aviation stocks with the extra cash.
Duan Yongping said at the time, “Dal (Delta Airlines) corporate culture is not bad, and the security is similar.”
But Duan Yongping didn’t make a heavy deposit, he said, “(buying aviation stocks) is pure fun, don’t imitate Kazakhstan.”
Buffett’s clearance reduction or pitfall “fans”

According to information disclosed by the US Securities Regulatory Commission on April 3, Berkshire Hathaway, owned by Warren Buffett, had sold about 18% of its Delta shares (12.99 million shares) within a week. The average transaction price is between 22.96 and 26.00 US dollars, which is almost a “waist cut” stop loss.
After showing signs of reducing holdings in early April, on the morning of May 3, Buffett said at the shareholders’ meeting that he had sold “all positions” of the four major US airlines.
Buffett even “made up” the aviation stocks at the shareholders’ meeting, expressing his attitude towards the declining aviation sector in the medium and long term. He said, “It turns out that my view of this business is wrong. This is not the fault of the four excellent CEOs. Believe me. Being the CEO of an airline is not fun. I do n’t know from now on. After 3 to 4 years, will the demand for air travel return to last year’s level because there are too many planes.

“He also said that it is now more risky to buy airline stocks.
Berkshire’s liquidation reduction and Buffett’s long-term decline have both released important signals for the market, and aviation stocks have a greater probability of falling.
Like Duan Yongping, the “fans” of the bargain-hunting aviation stocks affected by Buffett in the near future may face losses.
Duan Yongping was more blunt, “I was a little surprised that the bus cleared the airline, because he just said that he would not sell the airline! At this time, selling is equivalent to getting fans into it, which is a bit difficult to understand.”
Duan Yongping still optimistic about aviation stocks
Duan Yongping, who has created brand myths such as “Xiao Ba Wang”, Backgammon, OPPO, vivo and so on, once claimed that “I made more money in investment than I have earned in 10 years in the industry”, and has the title of “China Buffett” in the industry. He himself is also a loyal “fan” of Buffett.
In 2006, he spent 620,000 US dollars to capture Buffett’s lunch, becoming the first Chinese businessman to win this opportunity. Duan Yongping said that he had learned a lot from Buffett, and the filming of this dinner was just to thank him when he faced him.
Duan Yongping’s personal investment philosophy has also been greatly influenced by Buffett. He mentioned in an interview with NetEase Finance, “I think my investment philosophy was originally from Buffett.”
As for the future prospects of aviation stocks, Duan Yongping’s views have diverged greatly from Buffett. Even if Buffett gave up his perseverance, Duan Yongping still felt that the money invested in aviation stocks would not drift.
He believes, “I still think that if the epidemic is a problem that will not pass for a long time, there are great opportunities for the surviving airlines. About 1–2% of all the investments I manage are invested in Delta is up, and I still do n’t think the money will float, and you should be able to see the results within a year. “
But many analysts are not as optimistic as Duan Yongping.
JP Morgan analyst Jamie Baker recently downgraded the shares of American Airlines and Wizard Air to “sell” and downgraded JetBlue and Southwest Airlines to “neutral.” The analyst said that he initially expected that the aviation industry’s revenue in 2021 may be flat in 2019. Currently, he expects that revenue in 2021 may be about 25% lower than in 2019.
The analyst also believes that American Airlines is the company with the largest crisis at present, because of its highest leverage, it has accumulated about $ 34 billion in debt. According to his prediction, American Airlines will also increase its debt by US $ 6 billion, with total debt reaching US $ 40 billion, while revenue will be expected to fall to US $ 35 billion and profits to US $ 5 billion, which will make the company ’s debt The leverage ratio increased from 5.3 times to 8.0 times.
Under the pressure of huge debts, airlines also urgently need to replenish funds. Stifel analyst Joseph DeNardi pointed out that among the major airlines, American Airlines seems to need financing the most. Although the company has raised US $ 2.5 billion since February, it may need US $ 4.5–6.5 billion to maintain its current debt. Liquidity needs. If the situation continues to deteriorate, the airline may require additional financing of US $ 7.5–9.5 billion.
Bernstein analyst David Vernon also warned about the airline ’s liquidity status. He estimated that the liquidity of American Airlines and United Airlines may be able to last for two months, while Delta Air Lines and Southwest Airlines may be able to sustain 5–8 Months.
In a report released in early April, CITIC Securities mentioned that heavy air transport assets, high operating leverage, and strong cycle sensitivity are the consensus. The ability to resist economic downside risks is extremely low. ) Means that the U.S. civil aviation industry has only just begun to decline. “
CITIC Securities believes that the short-term impact of the epidemic on passenger flow has continued to exceed expectations, but the long-term uncertainty of the impact of the US economy is the biggest obstacle to Berkshire’s investment.
Airlines ushered in bankruptcy
At the end of last year, the global aviation industry began to face a crisis. According to the statistics of the consulting agency International Aviation Agency (IBA), at least 17 aviation companies went bankrupt in 2019, and 2019 is the fastest year for global aviation industry bankruptcy. It is almost explosive growth.
In addition, according to statistics from aviation travel blog SamChui.com, in 2019, a total of 23 airlines around the world suspended flights and terminated their businesses due to financial difficulties and demand problems.
This year’s epidemic has exacerbated the current crisis facing the aviation industry.
According to the forecast issued by the International Air Transport Association (IATA) on April 14, affected by the new coronary pneumonia epidemic, global aviation industry losses will reach US $ 314 billion (about 2.2 trillion yuan) in 2020.
In March of this year, the Asia-Pacific Aviation Center (CAPA) warned that by the end of May 2020, most airlines in the world would go bankrupt, and only government and industry could act in concert to avoid this disaster.
According to the Civil Aviation Resources Network statistics, as of May 2, nine airlines worldwide have gone bankrupt or applied for bankruptcy protection, including Flybe, an established British branch airline, and RavnAir, the largest airline in Alaska.
Under the crisis, the giants were not spared. According to CCTV news reports, on April 29, a source at the largest European airline Lufthansa said that Lufthansa may seek some form of bankruptcy protection while negotiating with the government on the 9 billion euro rescue plan.
Lufthansa previously said that because more than 90% of its passenger planes are grounded, the company now loses about 1 million euros per hour, and their cash reserves can only be maintained for about half a year. Lufthansa is currently negotiating with the German government on the 9 billion euro bailout plan. If bail is not available, Lufthansa may consider initiating bankruptcy protection procedures.
Recently, the US government has passed a $ 2 trillion bailout bill, which will provide about $ 50 billion in assistance to the aviation industry. The share price of American Airlines has rebounded briefly. However, obtaining aid funds requires a complicated application process, and at the same time or will face a certain degree of government control, the actual rescue effect of the aviation industry remains to be seen.
Chinese aviation stocks are expected to step out of the independent market in the medium and long term
CITIC Securities said in the research report that China’s civil aviation industry is clearly different from the US aviation sector.
On the one hand, the profits of China ’s three major airlines are much lower than those of major US airlines, and the valuation is currently at the bottom of historical valuation.
On the other hand, the epidemic affected both the demand side and the supply side of China’s civil aviation industry. With the significant recovery of demand afterwards, the limited supply and the low oil price, the net interest rate is expected to rise rapidly.
Anxin Securities also expects that the current resumption of work across the country is progressing in an orderly manner, and it is expected that the air passenger flow will gradually recover. With the progress of the prevention and control of the new coronary pneumonia epidemic and the introduction of various domestic support policies, public business travel is expected to take the lead in recovery, while tourism travel will also be delayed After the release, the summer season may be expected. In the long run, the current valuation of aviation stocks is in the bottom range and is expected to usher in long-term layout opportunities.
According to consulting firm Kea & Partners, China will add nearly 7,800 passenger aircraft within 10 years, and surpass the United States to become the world’s largest aviation market within 5 years.
In addition, while increasing the training of domestic pilots, China is also spending a lot of money on recruiting foreign pilots. The current “failure” of airlines provides opportunities for Chinese airlines to attract high-quality talents. (Li Di, Trainee Reporter, China Fund News)