Warren Buffett David A. Grogan | CNBC

Southwest Airlines may be next on Warren Buffett's shopping list, according to a Wall Street firm. "Warren Buffett recently said he might buy a whole airline and that he wants to do a 'huge' deal while bemoaning market valuations," Wolfe Research's Hunter Keay wrote in a note to clients Friday. "We speculate on which airline BRK [Berkshire Hathaway] may buy, too, using BRK's historical buying patterns as a guide through a data-driven analysis, ranking each one relative to others."

The billionaire investor told CNBC last month, "I wouldn't rule out owning an entire airline." The analyst said Buffett likes to buy companies with solid cash flows, strong competitive advantages and "high-grade" management teams. Southwest Airlines "screens well on those, as does DAL but to a lesser extent … LUV seems like the most logical candidate," he wrote. Berkshire Hathaway already has a large stake of more than $3 billion in Southwest Airlines, according to the company's 2017 annual letter.



The Oracle of Omaha added in the letter he is itching to do a massive acquisition, but is having a difficult time due to elevated valuations. At year-end last year Berkshire Hathaway had $116 billion in cash and short-term Treasury bills compared with $86.4 billion at the end of 2016.

Southwest Airlines Co. Boeing Co. 737 aircraft sit on the tarmac at John Wayne Airport (SNA) in Santa Ana, California. Patrick Fallon | Bloomberg | Getty Images

"Berkshire's goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions. We certainly have the resources to do so," Buffett wrote. "This extraordinary liquidity earns only a pittance and is far beyond the level Charlie and I wish Berkshire to have. Our smiles will broaden when we have redeployed Berkshire's excess funds into more productive assets." Southwest Airlines declined to comment for this story. Berkshire Hathaway did not immediately respond to a request for comment.

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