Berkshire Adds $3.7 Billion Exxon Mobil Stake

Bloomberg November 15, 2013 0

Berkshire Hathaway Inc. (BRK/A) reported a stake in Exxon Mobil Corp

Berkshire Hathaway Inc. (BRK/A) reported a
stake in Exxon Mobil Corp. (XOM) valued at about $3.7 billion as
Warren Buffett’s company disclosed its largest new holding since
International Business Machines Corp. in 2011.

Buffett’s company owned 40.1 million shares of Exxon on
Sept. 30, Omaha, Nebraska-based Berkshire said yesterday in a
regulatory filing. The world’s biggest oil company by market
value rose 0.9 percent to $94.07 at 6:39 p.m. in extended
trading in New York yesterday, after the disclosure.

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 Exxon and bought its stock in
the past, holding a stake in the Irving, Texas-based energy
producer as recently as 2011.

Exxon Mobil “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.”

Exxon had advanced 7.7 percent this year through
yesterday’s close in New York, trailing the 26 percent surge in
the Standard & Poor’s 500 Index. (SPX)

About three-quarters of the Exxon 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 U.S. Securities and Exchange Commission sometimes
allows companies to withhold information from the public to
limit copycat investing.

Efficient Explorer

Exxon, which traces its roots to the 1880s and John D.
Rockefeller
’s Standard Oil Trust, is among the most-efficient
explorers among 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 U.S. oil producer, and $22.66 for
London-based BP Plc.

Exxon 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
$7.87 billion as rising crude prices that benefited the
company’s oil-production business squeezed margins at Exxon’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.

Energy Wagers

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 $488 million 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 Sept. 30 to 13.5 million shares,
yesterday’s filing showed. Buffett’s company also reduced its
holding
in London-based drugmaker GlaxoSmithKline Plc by 77
percent to 345,819 American Depositary Receipts.

IBM Purchase

Buffett disclosed two years ago that he had spent more than
$10 billion accumulating shares of IBM. Buffett calls
Berkshire’s investments in the computer-services company, Coca-Cola Co., Wells Fargo & Co. (WFC) and American Express Co. his “big
four.” Each is valued at more than $10 billion.

Buffett could have been drawn to Exxon 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 U.S. Treasury bills,” Kass said. “This is a
conservative, safe stock — a nice position for whenever a
successor takes over.”

To contact the reporters on this story:
Noah Buhayar in New York at
nbuhayar@bloomberg.net;
Joe Carroll in Chicago at
jcarroll8@bloomberg.net

To contact the editors responsible for this story:
Dan Kraut at
dkraut2@bloomberg.net;
Susan Warren at
susanwarren@bloomberg.net

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Article originally posted in Bloomberg website.

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