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Warren Buffet Dumps Exxon Stake amidst Oil Glut

As the prices of energy continue on a downward trend since the last quarter of 2014, Warren Buffet’s Berkshire Hathaway exited its stakes at one the of largest oil producers in the world and sold its Exxon Mobil shares.


Warren Buffet Dumps Exxon Stake amidst Oil Glut

Berkshire sold out up to 41 million Exxo Shares according to an SEC filling dated February 17 2015. The investment firm began this process in 2013 with the SEC filing showing that the firm held Exxon shares that were worth over $3.7 billion in November of the same year.  In this same year, Berkshire’s stake grew from 31 million to 40 million shares.

In the last quarter of 2013, Buffet and his firm increased his stake in Exxon, when the oil producer’s shares were as high as $90 per piece, a figure that is not lower than the current share price.

Amidst plunging oil prices, Exxon shares have performed well, decreasing by just 60% in the last six months compared with West Texas intermediate crude oil, which fell by 45% in the same duration.

Buffet’s Berkshire was the sixth largest investor at Exxon, prior to selling its stake. Berkshire had a 3.7% stake, which was the eighth largest in a versatile portfolio that lieutenants Ted Weschler and Todd Combs, and Buffett oversee.

Berkshire also dumped its ConocoPhilips shares, a move the firm has been undertaking for the last several years with only 471,994 remaining by the end of September 2014, which is equivalent to less than 0.1% of Berkshire’s stake in that portfolio.


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The 13F SEC filing provides a snapshot of Berkshire’s stake by the end of 2014. The filing also indicated that while Buffet exited Exxon, he added to his portfolio Deere & Co. The new stake is worth an estimated $680 million. Berkshire also bought a position in Twenty First Century Fox worth $160 million.

Buffet is possibly the one who chose the Deere stock. He has said previously that he tends to pick the larger investment positions while his two other partners usually pick the firm’s smaller stocks.

In the second quarter of 2014, Berkshire held 3.9 million Deere shares. However, Berkshire’s stake in Deere for its third quarter was not indicated in the filing as the firm requested the SEC to keep the holding confidential as it built its position. The filing now reveals that Berkshire increased its Deere shares to about 7.6 million in that third quarter and then to a further 17.1 million, an equivalent of 5% of Deere’s total shares in the last quarter.

As Berkshire steered clear of the oil industry in the last quarter, other major investors were on the lookout for cheaper deals. Daniel Loeb of Third Point bought a position at Philips and ValueAct Capital purchased up to $2 billion worth of Halliburton and Barker Hughes, which are in a strategic merger to withstand the market tumult.

Buffet’s move to exit Exxon, his largest oil stake comes against a background of plunging oil prices, job cuts and lower dividends for shareholders of many oil companies.


Market Impact

Some market analysts disagree with Buffett’s decision to sell out and exit the oil stocks. The general sentiment is that now is the most favorite time for investors to buy positions in large oil companies.

In spite of the oil glut, large oil companies are still attractive because they offer higher dividends with yields of up to 4.5%, a yield that many investors see as worthwhile compared to utility companies.

But the decision by big investors such as Berkshire to exit oil highlights the turmoil that is facing the energy sector. Therefore, although stocks in the energy sector have fallen, it is important for investors to be very selective.


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