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Is Berkshire Hathaway ‘s US$3.7B stake in ExxonMobil a signpost?


There is still room to grow in the oil and gas sector, appears to be the message that well-respected investment guru Warren Buffett is sending with Berkshire Hathaway’s (NYSE:BRK.A) US$3.7 billion stake in the world’s largest petroleum company ExxonMobil (NYSE: XOM).

While the supermajor has recently announced a 18% drop in profit and has seen its shares embark on a roller coaster ride, Buffett is well known for buying shares at a perceived discount to intrinsic value and holding on to them for the long term.

With a stake representing 1% of Exxon’s market capitalisation, this in turn implies that he considers further growth to be likely.

News of Buffett’s stake rallied the company’s stock, leading it to rise 0.8% last night to US$93.22 per share.

Investors may not know that Buffett, who is allowed to keep holdings confidential “for public interest reasons or the protection of investors” under a special U.S. Securities and Exchange Commission rule, has been quietly buying shares in Exxon this year before finally revealing his interest.

ExxonMobil reported earnings of US$7.9 billion for the third quarter ending 30 September 2013 and cash flow of US$13.6 billion.

The company has US$5.7 billion in cash at hand.


The purchase could be a harbinger of growth for ExxonMobil, which is set to start liquefied natural gas shipments from its PNG LNG project next year. Time will tell. The investment master has made his bets.


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