Warren Buffett and Berkshire Hathaway have made some eclectic investment decisions this year – getting out of oil and energy, and oil refining, buying into food, manufacturing (and getting his Burlington railroad unit to investment billions more in upgrading its network and on new equipment).
And in the June quarter Berkshire revealed it had sold out of Phillips 66, an oil refiner and National Oilwell Varco, a supplier of services and equipment to the energy sector.
And in early August Berkshire and Buffett revealed his biggest deal to date – the $US37 billion (including debt) buy of Precision Castway parts which makes parts for a range of manufacturing sectors, especially aviation.
But late on Friday night Buffett’s Berkshire Hathaway revealed possibly the most surprising move of all his latest a $US4.48 billion $A6.3 billion move back into oil refiner Phillips 66.
Berkshire is in effect rebuilding a stake it had made developed before oil prices starting falling in mid 2014 and seemingly quit earlier in the year.
Berkshire revealed the 57.98 million-share, or roughly a 10.8% stake in Phillips 66 in a Friday night filing with the US Securities and Exchange Commission.
Phillips 66 shares closed Friday at $US77.23, up 2.9% in response to the 12% rise in oil prices on Thursday and Friday. It’s up around 8% in two days.
Berkshire had held a large stake in Phillips, but shed nearly two-thirds of it in February 2014 when it swapped $US1.35 billion of shares for a chemicals business owned by Phillips that it merged into its Lubrizol unit.
In its August 14 mandatory SEC filing detailing its June quarter investment activities, Berkshire did not mention Phillips 66, after having previously reported a 7.5 million-share (half a billion plus value) stake as of March 31, but it raised speculation of a major market play when it disclosed some information confidentially to the market regulator.
The SEC sometimes lets Berkshire file confidentially so it can quietly buy a large amount of stock, without worrying about investors acting on his move and bidding up the price of target companies.
He did this in 2013, when Berkshire amassed a $US3.45 billion stake in Exxon Mobil Corp Buffett sold that stake in last year’s fourth quarter as oil prices were falling.
Phillips though has outperformed the energy sector – its shares are only down less than 10% in the past 20 months compared with the more than halving in oil prices since mid 2014 and similar and larger share price falls for a host of companies in the industry. They dipped under $US70 in mid August, which is the lowest they have been for months.
US analysts say this is a Buffett-directed investment as larger stock investments (and big company takeovers or stakes, such as Heinz and the current one, Precision Castparts) are his idea or are brought to him directly and not to his investment managers.
The Precision Castparts deal will cost Berkshire around $US32.3 billion, plus about $US5 billion in debt.
