Tags: pipeline | buffett | tepper | MLP

David Tepper, Warren Buffett Embrace Pipeline MLPs

David Tepper, Warren Buffett Embrace Pipeline MLPs
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By Wednesday, 17 February 2016 12:19 PM Current | Bio | Archive


Midstream oil and gas pipeline MLPs have been just about the most despised asset class in recent memory. Yes they just got a major shot in the arm from two legendary investors, Warren Buffett and David Tepper.

Buffett’s Berkshire Hathaway just disclosed today that it accumulated 26.5 million shares at an average price of $23.72, putting his cost basis at just shy of $630 million. That’s a small 0.3% piece of Berkshire’s portfolio, but it does represent over 1% of Kinder Morgan’s outstanding shares. And these numbers are as of year’s end. Buffett may very well have added to this position significantly in the six weeks that have followed. Shares have certainly gotten cheaper (they closed today at $15.62).

Making a bigger splash, David Tepper’s Appaloosa Management disclosed making major new investments in both Kinder Morgan and Energy Transfer Partners (ETP). Tepper bought 9.5 million shares of Kinder Morgan at an average price of $23.72. About 2.8% of Tepper’s portfolio is now invested in KMI, making it his 10th largest individual stock holding.

He also scooped up 5.1 million shares of ETP at an average price of $39.15 (it traded at $27.27 as of close today). ETP was Tepper’s 8th largest position as of year-end, making up about 3.5% of his portfolio.

Does this guarantee the bottom is in? No, of course not. But it is definitely worth noting that two of the smartest men in finance both jumped into this hated asset class at prices much higher than todays.

It’s bothered me for a long time that the smart money had been shunning MLPs. They’ve appeared dirt cheap to me for months, but the lack of buying by the Buffetts and Teppers of the world gave me pause. While I would never advocate buying a stock simply because a master of the universe has done so, it does give you that reassuring pat on the back when you feel you’re all alone in a trade and are starting to doubt yourself.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. As of this writing, he was long AAPL and MSFT. To read more of his work, CLICK HERE NOW.

Disclaimers: If I mention a stock favorably, you should assume that I have a position in it, both personally and in client accounts.  This does not, however, automatically mean that you should own it. I am expressing my opinions in this newsletter, not offering individualized financial advice or soliciting you to buy securities.  See full disclaimer here.

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CharlesSizemore
Midstream oil and gas pipeline MLPs have been just about the most despised asset class in recent memory. They just got a major shot in the arm from two legendary investors, Warren Buffett and David Tepper.
pipeline, buffett, tepper, MLP
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2016-19-17
Wednesday, 17 February 2016 12:19 PM
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