United Airlines’ bad week cost Buffett and other investors millions

United has lost $570 million in market cap this week, while Warren Buffett may have lost over $50 million on his investment

Investors in United Airlines parent United Continental Holdings Inc., which includes famed billionaire Warren Buffett, had a rough week. As images of a passenger being forcibly dragged off a plane last weekend were stamped indelibly on investors’ memories, United’s stock underperformed the airline sector by a wide margin.
United’s stock  shed $1.81, or 2.6%, since last Friday, while the NYSE Arca Airline Index  eased just 0.2% over the same time. By comparison, the S&P 500 index  lost 1.1% during the week. An attorney for David Dao, the passenger dragged off a United Airlines flight, said at a news conference that Dr. Dao suffered a concussion during the incident and will likely sue. Dao’s daughter Crystal Pepper also spoke about the toll the incident has taken on the family.

With about 314.6 million shares outstanding, according to FactSet, United’s price decline has shaved $569.5 million off the carrier’s market capitalisation this week. Buffett owned 28,951,353 shares of United as of Feb. 14, according to a filing with the Securities and Exchange Commission. With 9.2% of the shares outstanding, Buffett was by far the carrier’s largest shareholder, according to FactSet. If his holdings remain unchanged, Buffett would have lost $52.4 million this week on his United bet, and $135.2 million since Feb. 14. Chief Executive Oscar Munoz, who tried to put out the public-relations fire by publicly apologizing multiple times, owned 207,772 United shares as of Feb. 28, an SEC filing shows. That implies about a $376,000 loss this week, but has gained about $237,000 since United refused last month to allow two preteen girls from boarding a plane for wearing leggings.

United Airlines CEO Oscar Munoz apologized to the passenger who was injured while being forcibly removed from a flight, and said he was ashamed of the company’s handling of the incident. This and much more on today’s Lunch Break. Photo: Getty. The selloff has also put the stock in a precarious technical position. Twice this week, on Monday and Wednesday, it traded above the closely watched 50-day moving average intraday, which many chart watchers see as a dividing line between short-term uptrends and downtrends, but failed to sustain the gains on both those days. That might suggest prices could continue to trend lower over the short term. The 200-day moving average, which many view as a long-term trend tracker, extended to $61.45, or 11% below Thursday’s closing price.
Meanwhile, Wall Street analysts remained sanguine on United’s outlook. The average rating of the 18 analysts surveyed by FactSet was the equivalent of buy, and the average price target of $82.94 was 20% above current levels, and 9.1% above the Dec. 20, 2016 record close of $76.05. Some analysts are also expecting United to extend its streak of beating earnings expectations to five-straight quarters, when the carrier reports first-quarter results on April 17.
“We don’t yet see an impact on United’s ticket sales for the event versus the other airlines,” Ross wrote in an emailed note to MarketWatch. “We do expect to see a purchase decline of some level for [United] tickets but the data doesn’t imply how bad it could or could not actually be.”