A view of the ExxonMobil refinery in Baytown, Texas.
NEW YORK: Berkshire Hathaway Inc has reported a stake in ExxonMobil Corp valued at more than $3.7bn as Warren Buffett’s company disclosed its largest new holding since IBM Corp in 2011.
Buffett’s company owned 40.1 million shares of ExxonMobil on September 30, Omaha, Nebraska-based Berkshire said in a regulatory filing. Berkshire has benefited this year as its stock picks rallied along with the broader market, affirming a strategy of favoring equities instead of bonds amid near record-low interest rates. Buffett, 83, has tracked ExxonMobil and bought its stock in the past, holding a stake in the Irving, Texas-based energy producer as recently as 2011.
ExxonMobil “is undervalued, in his opinion, and pretty much being ignored by the market,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business who has taken students to meet Buffett in Omaha. “He knows the company. He knows it well.” ExxonMobil had advanced 7.7 percent this year through Thursday’s close in New York, trailing the 26 percent surge in the Standard & Poor’s 500 Index.
About three-quarters of the ExxonMobil holding was added in the three months ended June 30, according to a separate filing yesterday. Berkshire requested confidential treatment in an August document detailing its portfolio at the end of the second quarter. The Securities and Exchange Commission sometimes allows companies to withhold information from the public to limit copycat investing.
ExxonMobil, which traces its roots to the 1880s and John D Rockefeller’s Standard Oil Trust, is among the most-efficient major international energy producers, spending $19.27 to find the equivalent of a barrel of crude last year, according to data compiled by Bloomberg. That compared with $21.48 in per-barrel costs for Chevron Corp, the second-largest US oil producer, and $22.66 for London-based BP.
ExxonMobil boosted oil and natural-gas production by 1.5 percent during the third quarter, reversing a two-year stretch of output declines. Net income for the period dropped by 18 percent to $7.87bn as rising crude prices that benefited the company’s oil-production business squeezed margins at ExxonMobil’s refineries.
Brent crude futures traded in London, the benchmark price for more than half the world’s oil, have averaged $108.48 a barrel this year. Although that’s down 2.9 percent from the 2012 average, it’s still almost twice as much as the 2001-2010 average, according to data compiled by Bloomberg.
Buffett, Berkshire’s Chairman and Chief Executive Officer for more than four decades, has had successes and blunders betting on energy. He booked profits in 2007 as he sold stock in PetroChina Co after the shares rose more than eightfold since Berkshire’s $488m investment in 2003.
In 2009, Berkshire posted its worst quarterly loss in at least two decades, fueled by a charge on the decline of oil producer ConocoPhillips. Buffett said he made a major mistake investing in the company with oil prices near their peak.
Berkshire cut its stake in ConocoPhillips by 44 percent in the three months ended September 30 to 13.5 million shares. Buffett’s company also reduced its holding in London-based drugmaker GlaxoSmithKline Plc by 77 percent to 345,819 American Depositary Receipts.
Buffett disclosed two years ago that he had spent more than $10bn accumulating shares of IBM. He calls Berkshire’s investments in the computer-services company, Coca-Cola Co, Wells Fargo & Co and American Express Co his “big four: Each is valued at more than $10bn. Buffett could have been drawn to ExxonMobil because he hasn’t been able to find a big acquisition recently, causing cash to accumulate at his company, said the University of Maryland’s Kass. The investment also could be beneficial if it’s still in the portfolio after Buffett’s no longer leading the company.
Stock in the energy company “certainly does a lot better than sitting in US Treasury bills,” Kass said. “This is a conservative, safe stock — a nice position for whenever a successor takes over.”
Wp-Bloomberg
