Monday, November 17, 2008

Bershire "ups" shares in ConocoPhillips

Buffett's Berkshire Boosts Stake in ConocoPhillips (Update3)

By Erik Holm, Edward Klump and Linda Shen

Nov. 14 (Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc. became the largest shareholder in oil producer ConocoPhillips and took a stake in manufacturer Eaton Corp. in the third quarter as stock markets tumbled.

Berkshire had more than 83 million shares in Houston-based ConocoPhillips as of Sept. 30, compared with about 17.5 million on March 31, the company said today in a regulatory filing. Buffett also disclosed a reduced holding in Bank of America Corp. and more shares of NRG Energy Inc., the second-biggest power producer in Texas. The Standard & Poor's 500 Index dropped 8.9 percent in the three months ended Sept. 30.

Berkshire, which purchased MidAmerican Energy Holdings in 2000 and reported record profits last year from selling holdings of PetroChina Co., is betting on a long-term increase in energy demand worldwide. Global oil consumption will increase about 25 percent to 106 million barrels a day by 2030, the International Energy Agency said this week.

``Buffett is thinking decades ahead,'' said Jeff Matthews, author of ``Pilgrimage to Warren Buffett's Omaha'' and founder of Greenwich, Connecticut-based hedge fund Ram Partners LP. ``He's thinking about oil production falling and an eventual doubling of worldwide demand as countries like China reach U.S. levels.''

ConocoPhillips traded as low as $67.31 a share in the third quarter after closing 2007 at $88.30. The company slipped $1.79, or 3.6 percent, to $47.39 in New York Stock Exchange composite trading today before Berkshire's disclosure.

Waiting for Spring

Buffett, the world's preeminent stock picker, has said he's also spending his own money to buy U.S. stocks as prices decline amid the worst financial crisis in 75 years, switching holdings from government bonds. Berkshire, where Buffett is chief executive officer, spent about $3.94 billion on stocks in the quarter and sold shares for about $300 million, according to separate filings.

``Most major companies will be setting new profit records 5, 10 and 20 years from now,'' Buffett said in a column in the New York Times in October. ``If you wait for the robins, spring will be over.''

Berkshire held about 59.7 million ConocoPhillips shares as of June 30, Buffett revealed in a separate filing. Buffett, 78, won permission from regulators to omit that number from his second-quarter filing and withhold it until today to prevent copycat investing.

Looking for Stability

``Energy is an industry that has the stability that he's looking for,'' said Michael Yoshikami, the president of YCMNet Advisors in Walnut Creek, California, which manages $850 million, including Berkshire shares. ``Conoco is a huge refiner, and while refiners are certainly under some pressure, they are essentially a service-for-fee business, so they are a classic kind of stable, core business for his portfolio.''

ConocoPhillips rose $1.06, or 2.2 percent, to $48.45 at 7:10 p.m. in New York in extended trading. Bill Tanner, a spokesman for ConocoPhillips, had no immediate comment.

Berkshire increased holdings in NRG Energy by 54 percent to 5 million shares, a 2.2 percent stake. The firm was the object of a takeover offer from Exelon Corp. after the Princeton, New Jersey-based company lost half of its market value in two months. NRG's board of directors this month rejected the offer.

Buffett also disclosed a 1.8 percent stake in Cleveland- based Eaton, the maker of parts for Boeing Co. planes and Volkswagen AG cars.

Eaton Corp.

``Eaton fits exactly with his investment strategy,'' said Gerald Martin, a finance professor at American University's Kogod School of Business in Washington. ``He likes to say that he wants to invest in companies that he can understand, that he can really get his arms around, and take a look at them and project their cash flows.''

Eaton rose $1.54, or 3.7 percent, to $42.69 at 6:24 p.m. in late trading in New York. Prices for new Berkshire holdings typically jump as mutual funds and individual investors mimic the stock picks. Martin co-wrote a study in 2007 that found buying after such disclosures would have delivered annualized returns of about 25 percent over 31 years, double the performance of the S&P 500. Eaton spokesman Peter Parsons declined to comment.

Buffett cut his stake in Bank of America by almost half, while increasing his investment in U.S. Bancorp. Charlotte, North Carolina-based Bank of America, which purchased money-losing mortgage lender Countrywide Financial Corp. in July, has lost 64 percent of its market value in the last 12 months.

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