Tags: Buffett | oil | Exxon | BlackRock

Buffett Chills on Big Energy Stocks, But Others Move in at Rock-Bottom Prices

By    |   Thursday, 19 February 2015 09:26 AM

Warren Buffett is bailing out of big oil stocks, but some value investors believe he might have moved too soon.

Lots of folks follow the trades of the Oracle of Omaha because of his stellar long-term track record and his knack for buying downtrodden stocks at dirt-cheap prices just before they go up again.

So does the fact Buffett dumped his nearly $4 billion stake in Exxon, plus his holdings in Conoco Philips, during the fourth quarter mean that crude and oil stocks are going to resume their sustained downturn?

To the contrary, CNNMoney reported. BlackRock, the world's biggest asset manager, likes the out-of-favor energy sector — especially the oil giants like Exxon.

"We favor the 'super majors' because of their strong balance sheets, high dividends and integrated business models," the BlackRock Investment Institute wrote in a report.

BlackRock favors the integrated oil firms in part because they have 12-month forward price-earnings ratio of 10 — a very cheap valuation — according to CNNMoney, and will benefit from higher refining margins and lower capital costs.

That's not to say Buffett is shedding all his energy holdings. CNNMoney noted the Berkshire Hathaway chief actually added to his holdings of refiner Phillips 66 during the fourth quarter and also bought more shares of Canadian oil-sands play SunCor Energy.

So perhaps his lack of enthusiasm in the energy sector is limited to the big integrated oil names.

Aaron Task, Yahoo Finance's editor in chief, believes it's significant that Buffett got out of Exxon Mobil.

"I think he's sending either a lack of confidence in Exxon's management or no confidence that oil prices are going to rise very soon," he proclaimed.

Buffett's move might indicate a lack of faith that Exxon's leadership will be able to make the right strategic acquisitions during this period of turmoil in the industry, according to Task. He noted Buffett's investments do not come with a money-back guarantee.

"Let's also not forget he is not infallible. He got into Exxon maybe at the wrong time," Task stated.

Billionaire investor George Soros actually showed some bullishness toward the energy industry during the fourth quarter.

His Soros Fund Management took new position in both Devon Energy Corp. and Transocean Ltd., Reuters reported.

The hedge fund firm, which manages the investments of investor George Soros and his family, bought 385,497 shares of Devon Energy and 149,000 shares of Transocean in the fourth quarter, according to a filing with the Securities and Exchange Commission.

In any event, oil prices and energy stocks have bounced back in February after a months-long dive.

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Warren Buffett is bailing out of big oil stocks, but some value investors believe he might have moved too soon.
Buffett, oil, Exxon, BlackRock
Thursday, 19 February 2015 09:26 AM
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