Warren Buffett is considered a shrewd investor.
So his latest move to sell off 89 percent of his shares of Walmart intrigues this investing ingenue.
Buffett’s Berkshire Hathaway announced Tuesday that it had sold off $900 million of Walmart stock as it invested elsewhere. Apparently Buffett believes Amazon will win the e-commerce battle.
Where did the money go? Buffett’s firm went big into airline stocks.
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What does Buffett know? Perhaps he made note that President Trump met with the airlines?
Who know, but Buffett’s move reminds me of the last Bond film where the villain Le Chiffre prepared to blow up an airline; after he shorted the stocks. In the movie, Le Chiffre lost…because of Bond. Something tells me that Buffet has no plans on losing.
His stake more than doubled ownership in American Airlines. Buffet then upped Berkshire’s shares by six times its shares in United. Then, he increased their investment in Delta by 1,465 percent. Finally, Berkshire increased its ownership of Southwest Airlines, so that it now owns 43 million shares.
Berkshire increased its shares of the tech giant by 277 percent in the final quarter of last year.
Buffett noted in 2016, when he started selling off Walmart stock, that Amazon was causing upheaval across the retail sector.
“It is a big, big force and it has already disrupted plenty of people and it will disrupt more,” Buffett said.
He said Amazon’s competitors, “including us in a few areas, have not figured the way to either participate in it, or to counter it.”
Buffett is very skeptical when it comes to retail reboots.
“Retailing is like shooting at a moving target,” Buffett said. “Turning around a retailer that has been slipping for a long time would be very difficult. Can you think of an example of a retailer that was successfully turned around?”
Walmart’s online sales for 2015 were $13.7 billion; Amazon amassed $107 billion in sales.
Buffett may underestimate Walmart.
In only a few short years they went from no groceries to being the #1 grocer in the America. Years earlier they did the same thing in retail.
Buffett and team disagree.
To compete against Amazon, Walmart needs to stress what it does best, said Cowen and Co. analyst Oliver Chen. He said Walmart needs to use its physical presence to deliver services that can’t be replicated online and focus on its low-cost image.
“Wal-Mart needs to change and accelerate innovation in pricing, assortment access, and experience; otherwise, we believe the company will continue to lose market share to Amazon,” Chen said.
Other analysts say Amazon will be hard to beat.
“The growing popularity and convenience of Amazon Prime, now in 50 million homes, makes it less and less likely shoppers would go anywhere else but Amazon,” said Stefany Zaroban, director of research for Internet Retailer.
“Walmart doesn’t have the assortment, the fast shipping or the innovative culture that Amazon has,” said Sucharita Mulpuru-Kodali, an analyst with Forrester Research. “Walmart is certainly trying as best they can, but they have a lot of legacy systems and a big-company culture, which are difficult to change.”