NEW YORK (TheStreet) --ConocoPhillips (COP) is a popular energy holding for investors wanting growth and income. That's why it surprised me to learn that perhaps the smartest investor of all time, Warren Buffett of Berkshire Hathaway (BRK.A) made major reductions in his exposure to the company this year.
Buffett is the quintessential buy-and-hold investor who once quipped, "Someone is sitting in the shade today because someone planted a tree a long time ago." He'd rather buy a company in its "seedling" stage and patiently wait for it to grow to maturity before he decides to be seller.
That seems to be his view of the oil giant. According to Berkshire's latest report, it reduced its Conoco holdings by nearly 88% although it still owns 1,355,228 shares worth over $1.09 billion as of June 30.
The selling prices for COP shares were between $69.48 and $86.10, Buffett's company reported, with an estimated average price of $77.79. A report from his blog explained part of the reason for the huge reduction in COP shares: "In all honesty, the move Buffett made in lowering his position in Conoco Phillips...are likely the result of Berkshire looking to limit the potential falling oil prices downside."
What it doesn't say is of equal importance: Since hitting its 52-week high of $87.09 on July 24, shares of ConocoPhillips corrected nearly 10%. Shares, at around $81, are up 14% for the year to date but still 7.5% below the recent high.
This summertime correction could lead Berkshire and other investors to buy more Conoco shares.
Not only have energy prices have corrected as anticipated, but ConocoPhillips management is willing to sell assets to fund its shareholder-friendly approach. The $2.92 annual dividend offers a generous yield with a sustainable payout ratio of 38%, opening the possibility of additional increases.
Director of External Communications and Media Relations Daren Beaudo, in speaking about COP's prospects, reiterated two comments CEO Ryan Lance made at a recent analysts meeting.
"Our goal is to deliver double-digit returns to our shareholders on an annual basis," Beaudo said. "That double digit is really important because we think there's a clear place for this kind of energy stock, one that has steady, consistent, predictable, stable and low risk returns."