Warren Buffett sells $4.7b Exxon stake in global oil rout

Buffett, revered by many as an investment guru, built Berkshire into the fourth-biggest company in the world through acquisitions and by picking stocks that surged in value. Photo: Andrew HarrerWarren Buffett’s investment company Berkshire Hathaway has exited its $US3.7 billion ($4.7 billion) investment in oil giant Exxon Mobil Corp. amid a slump in crude prices. Crude has fallen by about half since June as US production surged and the Organisation of Petroleum Exporting Countries resisted output cuts. The decline has ravaged oil company profits and forced major producers and drillers to slash spending and fire thousands of workers. Berkshire has “not really had the hot hand in energy,” said Fadel Gheit, an analyst for Oppenheimer & Co. in New York. “The whole energy sector obviously is now traded in completely different circumstances than they were only a year ago.” Buffett, revered by many as an investment guru, built Berkshire into the fourth-biggest company in the world through acquisitions and by picking stocks that surged in value like Coca-Cola and the former Washington Post Co. Still, he’s had a mixed record when it comes to investing in energy companies. One of his biggest winners was PetroChina In 2007, he booked a $US3.5 billion profit after selling an investment in the oil producer of about $US500 million. That was followed by an ill-timed bet on ConocoPhillips before crude prices peaked in 2008, and a $US2 billion bond investment in Energy Future Holdings that was later written down as natural gas prices plunged. Berkshire’s 41.1 million shares of Exxon cost on average $US90.86 apiece in 2013, according to the latest annual report. A regulatory filing Tuesday showed Buffett sold the holding during the fourth quarter. The oil company traded for an average of $US93.27 in those three months, so Berkshire could have sold the stake at a profit. Scott Silvestri, a spokesman for Exxon, declined to comment.

Energy holdings

Buffett also eliminated a smaller holding in ConocoPhillips while adding to a bet on Canadian synthetic crude oil producer Suncor Energy and oil refiner Phillips 66, according to the filing, which detailed the US stock portfolio at Buffett’s company as of December 31. The changes show that that there are differing views about energy stocks at Berkshire, said Jeff Matthews, a shareholder and author of books about the company. Buffett, 84, has been handing more funds to his back-up stock pickers, Todd Combs and Ted Weschler, as part of his succession plan. The billionaire Berkshire chairman and chief executive officer has said the biggest holdings in the portfolio tend to be his. “There was clearly no edict that says, ‘Oil is terrible, let’s get out,'” Matthews said in a phone interview. “Someone has a different opinion about it.”

IBM, Deere and Fox

Buffett affirmed his support for one of his biggest holdings, International Business Machines, in the fourth quarter, by adding 6.5 million shares. The stake is now worth about $US12.4 billion. Buffett didn’t respond to a request for comment sent to an assistant. Last year, the computer-services company fell below the price Buffett paid for most of the stake after abandoning an earnings forecast. CEO Ginni Rometty is trying to reignite growth at IBM by expanding sales for newer cloud computing and data analytics offerings. Berkshire also increased its investment in agricultural equipment maker Deere & Co. and disclosed a stake in Rupert Murdoch’s 21st Century Fox valued at more than $US160 million based on Tuesday’s closing price. Buffett has said he’s focused on buying whole businesses and expanding them over time. Berkshire now derives a majority of its profit from operating subsidiaries, including railroad BNSF, electric utilities and manufacturing operations. That’s a reversal from two decades ago when most profit came from insurance units. Investors have cheered the shift even as some of Buffett’s stock picks faltered. Berkshire shares rallied 27 per cent in 2014 to near-record levels. “Last year really shows” how the stock portfolio has become less important, said Cliff Gallant, an analyst at Nomura Holdings. “It wasn’t a stellar year for the portfolio, but it was a good year for the company.”


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