Buffett Reports Exxon Stake, Shares Rise

NEW YORK ( TheStreet) -- Exxon Mobil ( XOM) shares traded to the upside on Friday morning following the release of legendary investor Warren Buffett's quarterly update. U.S. regulators force large investors like Buffett to disclose their stock holdings every quarter for greater transparency. On Thursday, Berkshire Hathaway ( BRK-A) reported its 13-F filing for the quarter ended Sept. 30.

Many small and large investor take great interest in these disclosures as they offer a glimpse into smart money's strategies for buying and selling stocks. On Thursday, Buffett disclosed a new $3.75 billion stake following the acquisition of 40.1 million shares in the largest publicly traded oil company. In an accompanying's amended Securities and Exchange Commission filling we see the majority of these shares, more than75%, were purchased in the three months leading up to June 30. Occasionally large investors like Buffett can arrange for delayed disclosures to avoid the market following his actions and pushing his purchase price higher.

Due to the size of Exxon, roughly $408 billion in market capitalization, Buffett's position represents just 0.9% of the company's shares. However, it is nonetheless a sign of strong support by one of the world's most savvy investors. For Buffett, the purchase is significant to say the least. Exxon shares will now represent roughly 4% of the $99.5 billion in the publicly disclosed stock portfolio of Berkshire Hathaway. Using current figures, this would make Berkshire Hathaway the sixth largest shareholder in the company.

Buffett has historically loved investing in well established, prominent and lagging names within the market. Exxon seems to fit his investing strategy well and will offer easy exposure to the global energy space for Berkshire. A couple weeks ago Exxon reported a mixed third quarter result. Profit in the third quarter dropped to $7.87 billion, $1.79 per share, from $9.57 billion, or $2.09 per share, in the third quarter of last year. While company profits may have declined, output rose for the first time in two years as a result of the company's new projects. Oil and natural gas output rose 1.5% to 4 million barrels of oil equivalent per day. Weaker refining margins and throughput hurt the company's downstream results. The downstream segment recorded profit of $592 million in the third quarter in comparison to $2.6 billion in the third quarter of last year.

Since 2011 Buffett has avoided the name, however, he has stayed exposed to the energy space through his holdings in ConocoPhillips ( COP), Phillips 6 ( PSX) and National-Oilwell Varco ( NOV). Buffett cut Berkshire's stake in ConocoPhillips by 44% during the quarter to just 13.5 million shares.

The Oracle of Omaha has had mixed results in the energy space throughout his career. In 2007, Buffett cashed in some serious gains from his investment in PetroChina after the shares rose by more than 800% since his initial investment in 2003. However, in 2009 Berkshire posted an ugly quarterly loss, the worst in more than 20 years as a result of plummeting oil prices and exposure to ConocoPhillips. The swap from Conoco to Exxon seems to be a value play seeing as Conoco shares are higher by nearly four times the rate of Exxon this year.

Year to date Exxon shares are only 7% higher despite broad market strength. The S&P 500 is higher by more than 25% this year as loose monetary policy, low interest rates, and economic strength fuels investment.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Nate Matherson is currently a student at the University of Delaware, where he is pursing degrees in Finance and Economics. Nate manages his own investment portfolios in addition to writing investment analysis articles for a variety of news outlets. In the future, Nate would love to work in either the portfolio management or investment banking industry.

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