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Warren Buffett Sees Great Combo in Exxon Mobil, Asia

Stocks in this article: XOM BRK.A COP SU PTR USO

NEW YORK (TheStreet) -- When Warren Buffett buys a stock, the price naturally rises.

In early-morning action, on the  news that "The Oracle of Omaha" recently purchased 40 million shares of Exxon Mobil (XOM) for $3.1 billion, the stock is on fire. The Exxon Mobil buy was not Buffett's first array into Big Oil investing, and it will not likely be his last.  This is due to there being no industry better situated to profit from growth in Asia than the energy sector.

At present, Buffett, considered by many to be the best investor ever, has major positions in Suncor Energy  (SU) and ConocoPhillips  (COP). Due to the "Buffett Effect," the shares of each surged after that news became public. Over the last six months of market action, Suncor is up nearly 15%. For the same period, the share price of ConocoPhillips increased by more than 20%. But shares of Exxon Mobil rose by less than 3% for the same time segment; the major exchange-traded fund for oil, United States Oil  (USO), was down slightly.

Buffett also did well investing in PetroChina  (PTR), the major Chinese oil company. In 2002 and 2003, 1.3% of the shares were purchased by his Berkshire Hathaway (BRK.A) for $408 million. The shares were sold at a realized cost basis of $4 billion in 2008. A gain of 800% with a profit of $3.6 billion was realized. About that deal, Buffett lamented that he probably sold too soon.

The Asia angle is starting to play more into Buffett's investing, and has certainly factored into his Exxon Mobile buy. Recent investments in Lubrizoil, Heinz, ConocoPhillips, Suncor Energy, Burlington Northern Sante Fe Railways and others will all profit from growth in Asia. In 2011, he made his first trip to India, and, as reported by the BBC News Business, "Mr. Buffett has been bullish on Asia's growth and has invested in companies in Korea, China and India."

According to a earlier report by the U.S. Energy Information Agency, about two-thirds of the growth in demand for energy in the future will be from emerging markets, primarily in Asia. As detailed here on TheStreet, the International Energy Agency, in its World Energy Outlook, projects that transportation and chemicals will be the two industries consuming the most fuel, led by Asian nations. Exxon Mobil is ideally situated to serve both of those markets, with particular recognition of the importance and potential of the markets in China, India and other countries in Asia.

In a speech to the Asia Society Global Forum in June, Rex Tillerson, CEO of Exxon Mobil, stated that "As North American oil production increases and the need for imports fall, more of the oil produced in the Middle East and elsewhere is available to serve Asian growth. This is important because between now and 2040, Asian oil demand will likely grow by about 15 million barrels a day -- with the share of demand served by imports into the region rising to around 80%. So the rebalancing of supplies, made possible by increased North American production, is providing more stability and security around the globe."

With the Exxon Mobil investment, Warren Buffett has positioned Berkshire Hathaway to gain more from global growth. That is especially so for the increasing demand for energy in Asian markets. Investors should expect not only more energy investments from Buffett in the future, especially those that profit from growth in Asia.

Jonathan Yates does not have a position on any of the stocks mentioned in this article.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

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