Oil Price Slumps But Warren Buffet’s Makes Big Bet On The Commodity

Contrary to the herd instinct, Warren Buffet has proved once again why he is different as well as one of the greatest investors of all time.

Photo Credit: Mark Hirschey - Warren Buffet.
Photo Credit: Mark Hirschey – Warren Buffet.

Buffet through his renowned company, Berkshire Hathaway Inc., has increased his bet on the energy industry by pumping more than $4.5 billion into Phillips 66, the Houston-based oil refinery.

According to a Bloomberg report, Berkshire held almost 58 million shares after purchases this week, or more than 10 percent of the total outstanding, based on regulatory filing issued Friday by Buffett’s Omaha, Nebraska-based company. Phillips 66 closed at $77.23 on Friday in New York.

The billionaire, not willing to take a myopic view of the current oil market, has raised his stake in an industry that has gone flat and seen other investors running for the door.

However, Buffett and his deputy investment managers, Todd Combs and Ted Weschler, are prepared to take the long term view that the price of oil will come roaring back; if not in the medium term then certainly long term.

Concerns over the turbulence in the marketplace and given the uncertainty within the Chinese economy some investors are throwing in the towel while Berkshire has gone bullish by seizing the opportunity in buying new stakes in companies.

Phillips 66 shares fell below $70 on Monday amid a broad sell-off before rebounding sharply later in the week.

Buffett’s company formerly held more stock in the refiner. It used most of those shares to buy a business from Phillips 66 last year.

The Phillips 66 holding is relatively small for Berkshire’s stock portfolio.

Buffett’s company has stakes in Wells Fargo & Co. and Kraft Heinz Co. valued at more than $20 billion apiece. It is the top shareholder in Coca-Cola Co., IBM and American Express Co.

Yvad Billings, Readers Bureau, Fellow

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