Ten Reasons Warren Buffett Bought So Much Exxon Mobil Stock
Exxon Mobil Corp. (NYSE: XOM) was just listed as a new holding of Berkshire Hathaway Inc. (NYSE: BRK-B). This is not just any new holding either. Its size was a whopping 40.089 million shares, which was valued at just over $3.4 billion at the end of the quarter. Buffett apparently picked his timing well because his stake has risen in value up to $3.73 billion as of now.
24/7 Wall St. wanted to get into the mind of Warren Buffett to see why he bought such a large position here for Berkshire Hathaway Inc. (NYSE: BRK-A). We often evaluate Buffett actions, and we have been doing this for a while.
Here are the ten less obvious reasons that Buffett bought such a large stake, and we listed the full Berkshire Hathaway stock holdings as well.
The first reason is that Exxon Mobil Corp is simply the easiest oil and gas stock to hide out in. Compare this to his ambitions in CononoPhillips and Phillips 66 and it is very clear. Exxon is worth $407 billion versus $90 billion for Conoco. Buffett could literally double the stake size of Wells Fargo through time and it would not even be a 10% stake at current prices.
The second reason Buffett bought Exxon Mobil is that it remains undervalued. He can make trade if he wants based upon our a recent break-out call, but the reality is that the stock might be at a higher multiple if it did not take so much money to move the needle. At $93.22, the consensus price target is $95.54 and some think it is going north of $100 soon.
A third reason may sound like a value continuation, but it is more specific. This mega-cap stock trades at only 12.5-times expected 2013 earnings. It also trades at about 11.6-times expected 2014 earnings.
A fourth calling is that this DJIA stock comes with a dividend yield of 2.8% for new buyers now. If you just pretend that Buffett’s price is where it was last quarter, Buffett might be getting closer to a 3% dividend yield. You know that Warren likes getting those dividend checks in the mail. Those dividends will keep rising too.
A fifth reason that Buffett wanted in on Exxon Mobil is that he can easily add shares to his position via options. He can collect a premium, hope the stock gets put to him, and suddenly he owns many more shares without ever telling a broker he bought more stock.
A sixth reason is that he has owned it before. It was a small stake and Buffett likely realized this is just a much easier stock to leg in and out of (again).
The seventh reason Buffett bought Exxon Mobil is that the oil giant keeps buying back billions of dollars worth of its own stock. We have seen this with the last earnings but it is simply an ongoing issue.
The 8th reason again overlaps on value, but it is a serious issue. Exxon’s oil reserves were shown to be worth some $2.2 trillion earlier this year. That is 5-times its market cap.
An almost-last last reason is that the company’s outlook to 2040 is an altruistic one, and it fits in with that “forever” outlook that Buffett likes to keep in mind. The company’s outlook includes all forms of energy, not just oil.
The tenth reason Buffett bought a huge stake in Exxon Mobil is a bit self-serving for us, but we think Team Buffett took our advice for free. We reminded him of Exxon being the among the best stocks for him to buy back in 2010. We have pointed to this numerous times since.
There are many other reasons that Warren Buffett would have been drawn into Exxon Mobil, but these are some of the ones that might take longer for readers to find other than listing all of the macro-trends that are obvious.
By Jon C. Ogg
Buffett Steps On The Gas And Buys Exxon
Nov 17 2013, 11:17
The "Oracle of Omaha," Warren Buffett (BRK.B), again caused heads to turn yet with his company's purchase of a significant stake in Exxon (XOM) this week. The move puts a new focus on the energy sector of the market and what this purchase could mean to Exxon and other oil stocks as they move into 2014. Buffett is known as a strong "value investor" so other investors are giving these companies a hard look as the economy makes its slow recovery.
A Buffett Target
Warren Buffett has a penchant for buying into large, established companies that have a proven track record of earnings and stability. Perhaps his interest in Exxon could be expected as the company's stock has lagged for the past 3 to 5 years. This is exactly the type of holding Buffett could be expected to seek out in his ever-expanding hunt for bargain companies. His company, Berkshire Hathaway (BRK.A), already has a number of energy holdings, including NV Energy (NVE) and MidAmerican Energy (MDPWK). However, Exxon's leadership in the energy sector makes this a particularly interesting buy.
Warren Buffett has a penchant for buying into large, established companies that have a proven track record of earnings and stability. Perhaps his interest in Exxon could be expected as the company's stock has lagged for the past 3 to 5 years. This is exactly the type of holding Buffett could be expected to seek out in his ever-expanding hunt for bargain companies. His company, Berkshire Hathaway (BRK.A), already has a number of energy holdings, including NV Energy (NVE) and MidAmerican Energy (MDPWK). However, Exxon's leadership in the energy sector makes this a particularly interesting buy.
The Purchase
Berkshire Hathaway purchased 40 million shares in Exxon, the largest publicly traded oil company in the marketplace. The purchase represents 0.9 percent of Exxon's stock, a sizeable holding that tells investors that Buffett is expecting expanding opportunities in this sector in the months and years to come. Buffett applied to the Securities & Exchange Commission to delay announcing the purchase, which was actually made in the 2nd quarter. This is done to avoid having investors follow his actions, causing upsets in the market. The purchase was then announced to the public during the 3rd quarter.
Berkshire Hathaway purchased 40 million shares in Exxon, the largest publicly traded oil company in the marketplace. The purchase represents 0.9 percent of Exxon's stock, a sizeable holding that tells investors that Buffett is expecting expanding opportunities in this sector in the months and years to come. Buffett applied to the Securities & Exchange Commission to delay announcing the purchase, which was actually made in the 2nd quarter. This is done to avoid having investors follow his actions, causing upsets in the market. The purchase was then announced to the public during the 3rd quarter.
The Reasons Why
Buffett knows the Exxon is trading at 11.6 times its expected 2014 earnings. It's also a company that may be out of favor currently but which has a long history of finding ways to design itself into a machine for profits. Its current price is low but is expected to go higher by a number of analysts. The dividend on Exxon stock is 2.8 percent for new buyers, which serves as another desirable reason to own the stock. Exxon has also been buying back its own stock, which is another sign of their fundamental strength.
Buffett knows the Exxon is trading at 11.6 times its expected 2014 earnings. It's also a company that may be out of favor currently but which has a long history of finding ways to design itself into a machine for profits. Its current price is low but is expected to go higher by a number of analysts. The dividend on Exxon stock is 2.8 percent for new buyers, which serves as another desirable reason to own the stock. Exxon has also been buying back its own stock, which is another sign of their fundamental strength.
Conclusion
Buffett's interest in acquiring such a large stake in a large energy producer like Exxon means that he expects significant gains in this sector in the near future. Looking at the economy's steady recovery, he may be making calculations that will pay significantly in 2014 and beyond.
We agree with his thinking and rate the company a buy for value oriented accounts.
(Reuters) - Warren Buffett's Berkshire Hathaway Inc on Thursday disclosed a new $3.45 billion stake in Exxon Mobil Corp, after buying 40.1 million shares in the world's largest publicly traded oil company.
The purchase was disclosed in a U.S. Securities and Exchange Commission filing that detailed Berkshire equity investments, mostly listed on U.S. exchanges, as of September 30.
Berkshire also disclosed other changes to its holdings, including a reduced stake in another oil company, ConocoPhillips.
U.S. regulators require large investors to disclose their stock holdings every quarter, and the disclosures can offer a window into their strategies for buying and selling stocks.
(Reporting by Luciana Lopez and Jonathan Stempel in New York; Editing by Gary Hill)
Exxon Mobil puts 117-acre campus in Fairfax County up for sale
By ,
Mobil Corp. helped put Fairfax County on the map for corporate America in 1980 when it relocated the headquarters of its domestic refining and marketing operations to a woodsy campus at the intersection of the Capital Beltway and Route 50.
Hilton Hotels, Volkswagen of America and Northrop Grumman eventually followed suit, and this year, 10 Fairfax County-based companies made the Fortune 500.
(Courtesy Exxon Mobil) - The exterior of the main building at Exxon Mobil’s 117-acre campus in Merrifield, which is now up for sale as it prepares to relocate to Houston. Exxon Mobil’s secluded campus is one of the most valuable properties in Fairfax County.
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Now Fairfax County and its economic development unit are facing a new problem: what to do when the corporate pioneer — one of its chief tax benefactors — moves elsewhere.
Exxon Mobil, Mobil Corp.’s parent since 1999, has decided to relocate its Fairfax County operations, consisting of about 2,100 jobs, to Houston. Executives hope to have the campus completely vacated by the end of 2015.
Since deciding to depart, Exxon Mobil and its real estate consultants have been showing local officials and interested parties around their campus and this week are formally putting the property up for sale.
Though it is bordered by the Beltway, Gallows Road and Route 50, the campus is cloaked on all sides by trees, secluding it from surrounding neighborhoods. Of the 117 acres (47 ha), 92 remain in their natural state.
In the center are four connected office buildings built in two phases, one in 1979 and the other in 1989, plus a services building. Though the offices, which total 1.2 million square feet, don’t feature the floor-to-ceiling glass and 360-degree views that newer buildings might, there are many features that corporate users typically appreciate. Among them: more than 60 conference rooms, nine-foot ceilings, a 736-seat cafeteria, a gym, a swimming pool and a corporate board room featuring a lustrous beach wood table.
Discretion and security were obviously priorities in constructing it. Buried underground are more than 90 percent of Exxon Mobil’s 2,580 parking spaces and a quarter-mile-long service tunnel where all deliveries arrive.
Exxon Mobil and its real estate advisers from Cassidy Turley have branded the property One Fairfax. “We think this is one of the most attractive properties not only in the Washington, D.C., area, but that there’s very few things like this in the entire U.S.,” said Mark J. Stachowiak, portfolio manager for global real estate and facilities at Exxon Mobil.
A range of buyers might be interested in the property, and a handful have come forward already, according to Stachowiak and Gerald L. Gordon, executive director of the Fairfax County Economic Development Authority. “I think you could see anything from another corporate user, or corporate users plural, to any other kinds of uses,” Gordon said. “We won’t really know until they get the responses.”
The site has been talked about as a possible landing place for the FBI, as it fits the parameters of the agency’s headquarters search. But keeping the property on the tax rolls is a priority for Gordon. It is among the most valuable properties in the county, assessed this year at $201.3 million, which equates to a 2013 property tax bill of nearly $2.2 million. “We don’t want to lose them off the tax base,” Gordon said.
If the county cannot reel in another corporate titan to take over the campus, Exxon may sell to a developer, which could set up a battle for zoning changes. Two additional offices totaling 550,000 square feet have already been approved, but Exxon Mobil is also floatinga concept that would more than double the density on the property.
Fairfax County Supervisor Linda Q. Smyth (D-Providence District), whose district includes the Exxon campus, said zoning changes were not ideal and would require changing the area’s comprehensive plan.
“I think what people need to keep in mind is that they need to work with the site as it is, with the limited access and with the things that go with the site, as opposed to try to reinvent the site,” Smyth said. “I mean, it’s hard to reinvent geography.”
Stachowiak said the way the campus is used will be up to its new owner. “We’re not a developer. Any further development is between the new buyer, whoever that is, and the county,” he said.
Attracting another major corporate user, a skill for which Gordon has gained a reputation, might lessen the likelihood of a contentious zoning proposal. “Modern corporations are comprised of people and people have different tastes,” Gordon said. “Somewhere there is somebody who will like it.”
95,27 USD
+2,20% | +2,05
15/11/2013 22:00
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