Warren Buffett Reveals $3.7 Billion Exxon Mobil Buy
Berkshire Hathaway's purchase of the oil and gas giant is its largest since its $10 billion IBM investment in 2011.
Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) just reported a $3.7 billion stake in Exxon Mobil (NYSE:XOM).
In a move Bloomberg said was the company's largest new holding since investing $10 billion in International Business Machines Corp. (NYSE: IBM) in 2011, Buffett acquired 40.1 million shares of Exxon stock September 30.
Exxon closed Thursday at $93.22 and was up more than 1.2 percent at $94.40 in early trading Friday.
David Kass, business professor at the University of Maryland's Robert H. Smith School said Buffett believes Exxon is "undervalued, in his opinion, and pretty much being ignored by the market." Kass added that Buffett knows the company well. This is evidenced by the fact Buffett had a stake in Exxon as recently as 2011.
Based on Thursday's SEC filing, about three-quarters of Berkshire's Exxon holdings were added in the three months ending June 30, 2013. As often happens with Buffett and other large investors, the U.S. Securities and Exchange Commission let the company temporarily withhold public disclosure of the buy to limit copycat investing.
Buffett and Berkshire also sold 44 percent of its ConocoPhillips (NYSE:COP) holdings in the three months leading up to Sept. 30. In 2009, Berkshire showed its worst quarterly loss in two decades based on a decline in the value of its ConocoPhillips stock. Buffett attributed the loss to the fact he invested in the company when oil prices were too high.
Exxon spends $19.27 to find a barrel of crude oil, making it one of the most efficient in the industry. By comparison, Chevron (NYSE:CVX), Exxon's next-largest U.S. rival, spends $21.48 per barrel.
Buffett's new investment represents only 0.9 percent of Exxon's shares, but as Pavel Molchanov, energy analyst at Raymond James & Associates told Reuters, "When Warren Buffett gives his seal of approval to any company that is never a bad thing." Raymond James rates Exxon a "strong buy."
Radel Gheit, senior oil analyst at Oppenheimer & Co, which has a "perform" rating on Exxon, said "He (Buffett) likes buying big, established global brand names, and Exxon is a good flight-to-quality stock."
Exxon representative, Alan Jeffers, said simply, "We appreciate the confidence investors have in Exxon Mobil when they decide to invest in the company."
While Berkshire's quarterly filings do not reveal who buys or sells which stocks, Buffett has said he likes to personally make the company's largest investments.
Below, find some more great ETF and market content from Benzinga:
3 Reasons Every Family Office Should Own Oil and Natural Gas Stocks
Facebook and Google Pursuing The App that Teenagers Love
Worried Rates Are About to Jump? Not To Worry, Yellen Tells Senators
Benzinga Pro covers this and all market news in real time. Get your free trial here.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter