Warren Buffett’s Berkshire Hathaway Inc. added an investment in Kinder Morgan Inc. throughout the fourth quarter, snapping up shares from the pipeline operator since it’s market price plunged.
Shares in Kinder Morgan were up almost 10 per cent at US$17.16 in trading Wednesday.
Berkshire held 26.5 million shares from the company as of Dec. 31, based on a regulatory filing Tuesday disclosing U.S. stock holdings. The stake was worth $395.9 million after 2015.
Kinder Morgan’s shares fell 65 per cent last year amid a slump in energy prices. The company, which hauls gas and oil through a pipeline network of sufficient length to circle the globe three times, slashed its dividend in December for the first time to avoid a credit downgrade to junk status. The Houston-based company also said last month that it could sell assets to boost cash.
“It strikes me like a business that’s up his alley,” said Jeff Matthews, an investor and author of Buffett-related books. “It’s a business that’s going to continue for quite a long time,” he explained. And the stock has “gotten crushed,” creating a chance to buy at an attractive price.
Oil drillers, gold miners and rig operators have sacrificed dividends to save cash amid tumbling prices in oversupplied commodity markets. When Kinder Morgan cut its dividend, it pledged to not issue any new shares through the end of 2018.
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Shares Jump
Berkshire’s portfolio is closely watched by investors for clues into the way the billionaire chairman and the backup stock pickers are planning. Newly disclosed holdings often send shares higher.
One of Buffett’s deputy investment managers, Todd Combs or Ted Weschler, could be accountable for an investment. Have been building portfolios at Berkshire and have a tendency to make smaller bets than their boss.
“Our guess is the fact that it’s Todd or Ted,” said Tony Scherrer, director of research at Smead Capital Management, which oversees about $2.1 billion including Berkshire shares. “It’s not insignificant, but it doesn’t smell like a straight-up Buffett proceed to us.”
Energy Bets
Other closely watched investment managers added holdings in the energy industry during the fourth quarter. David Tepper’s Appaloosa Management bought shares of Kinder Morgan and Transfer Partners LP, while Seth Klarman’s Baupost Group increased its positions in Antero Resources Corp., an oil and gas producer, and Cheniere Energy Inc.
Another opportunity Buffett, 85, has seen recently is Houston-based Phillips 66. Berkshire disclosed in August it held a lot more than 10 per cent from the oil refiner’s stock and it has boosted its stake with regular purchases this year.
During the fourth quarter, Berkshire pared its holding in AT&T Inc. by 12.7 million shares, leaving a stake worth $1.6 billion after 2015. Weschler and Combs were one of the largest investors in DirecTV, which was purchased by AT&T this past year.
Berkshire made a small addition to its Wells Fargo & Co. holding and sold its remaining 1.98 million shares in Chicago Bridge & Iron Co. Once the largest investorin the engineering- and-construction firm, Berkshire began paring the stake last year.
Bloomberg.com
