It's Looking Like Warren Buffett Will Sell All of This Stock in 2014

Warren Buffett's Berkshire Hathaway sold a couple million more shares of ConocoPhillips. At this rate, Berkshire won't hold any at all by this time next year.

Feb 23, 2014 at 8:27AM

Every quarter, large money-managers have to disclose what they've bought and sold via "13F" filings. While Fools don't always follow what the big money does, we can often glean an idea or two by tracing their footsteps.

In 2008, Berkshire Hathaway CEO Warren Buffett made a big bet on ConocoPhillips (NYSE:COP). He would call it a "mistake of commission" in his 2008 letter to shareholders, pointing to the terrible timing -- in his words -- of the investment as costing Berkshire investors billions of dollars as energy prices dropped from their highs. At the time, Berkshire held some 84 million shares of ConocoPhillips. A year ago, Berkshire held 24 million shares. 

Tally it all up, and Berkshire sold more than 13 million shares of ConocoPhillips stock in 2013, more than half its remaining stake. Will Buffett sell the remaining 11 million shares in 2014? Should you follow? Let's take a closer look.

Different oil companies do different things
When Buffett invested in ConocoPhillips back in 2008, he wasn't just buying today's ConocoPhillips. In May of 2012, Phillips 66 (NYSE:PSX) went public, and existing ConocoPhillips shareholders were awarded with shares of this new company in a tax-free distribution. Considering that Berkshire still holds some 27 million Phillips 66 shares -- valued at $2 billion -- it's important to talk about what these different businesses do, and why they are attractive (or not.) 

Today's ConocoPhillips is a major E&P, or exploration and production company -- the world's largest, actually -- while Phillips 66 focuses on midstream, meaning moving oil and gas in pipelines from production to refineries, and marketing the finished products to end users. As a comparison, Chevron (NYSE:CVX) is an integrated major, involved in every sector of oil and gas E&P, midstream and refining, marketing, and petrochemical production. 

Why is Buffett moving on?
Taken at face value, it looks like Buffett is shifting away from ConocoPhillips partly due to its focus on an area of the oil business that's extremely sensitive to oil prices. As time passes, more and more of the world's oil reserves are being found in shale rock, or in ultra-deep offshore water, both of which are very expensive to produce from. What this means for ConocoPhillips is that oil prices must stay relatively high in order to both produce at profitable levels and fund further exploration. 

Chevron, on the other hand, has a significant midstream and petrochemicals business, which would offer some downside protection against falling oil prices, much as Phillips 66's midstream and petrochemicals focus does for it. However, Berkshire's Phillips 66 position serves another purpose as well.

Some of those shares are already sold
In December, Berkshire announced it was acquiring part of Phillips 66, in a transaction that would close in the first half of 2014. The company's flow improver business will be rolled under Berkshire subsidiary Lubrizol. This is a very "Buffett" transaction, as the flow improver polymers are important for pipeline operators, as it helps keep oil moving smoothly through the pipelines in different weather and temperature conditions. With oil production steadily increasing in the coming years, this "bolt-on" transaction looks to offer predictable and stable growth in revenues for the future, and at a tax-advantaged benefit as a stock-based transaction.

Final thoughts: Don't project your situation on Buffett's moves
It's important to remember that -- like any other investor -- Warren Buffett's reasons for buying and selling have nothing to do with your situation. Just because he's largely moved on from ConocoPhillips doesn't mean investing in the largest E&P in the world doesn't make sense for your portfolio. Similarly, when those Phillips 66 shares show up as "sold" on Berkshire's 13F in a few months, don't ignore that it was largely the product of a tax-advantaged acquisition that will probably benefit shareholders of Phillips 66 as much as Berkshire investors. 

If you want to invest like Buffett, don't just copy his moves -- copy his method. Find great companies with strong competitive advantages, invest at the best price you can get, and then get out of the way. Buffett made 80% of his massive fortune after he turned 50. His biggest secret? Patience and temperament. 


Looking for more of Buffett's best investing wisdom? Check this out
Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.


Jason Hall has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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