Warren Buffett Makes A Big Bet On Phillips 66 (PSX)

warren buffetBob Ciura:  It is once again time to analyze and scrutinize the additions and subtractions the world’s biggest money managers are making to their portfolios.

buffett's-big-moves

Hedge funds and other major asset managers have to report their portfolio changes to the Securities and Exchange Commission through 13F filings. By perusing through 13Fs, we can get valuable insights into how the biggest and most influential investors see the market and their personal holdings.

Berkshire Makes a Major Purchase

Warren Buffett, arguably the most famous investor of all time, recently filed a 13F as chairman of Berkshire Hathaway (NYSE:BRK-B).

The biggest addition to Berkshire’s portfolio last quarter was in oil giant Phillips 66 (NYSE:PSX), which Berkshire bought in a previously announced transaction. Berkshire owns approximately 10% of Phillips 66, and it’s easy to see why.

As an oil refiner, Phillips 66 is largely insulated from the carnage sweeping through the oil and gas industry. That’s because as a business, oil refining actually tends to improve when oil prices decline. Falling oil prices reduce refining feedstock costs, which boosts margins.

For example, Phillips 66’s adjusted earnings are up 21% year-to-date through the third quarter.

With all its cash, Phillips 66 showers its investors with cash returns. The stock pays a solid 2.5% dividend, and the company recently announced a $2 billion addition to its share buyback program.

Notable Reductions

Buffett didn’t just buy stocks last quarter; he also made a few notable sells. First, Berkshire cut its stake in asset management firm Goldman Sachs (NYSE: GS). As of Sept. 30, Berkshire owned just under 11 million shares of Goldman, down from around 12.6 million on June 30.

Next, Buffett reduced Berkshire’s holdings of struggling retail giant Wal-Mart (NYSE: WMT). The challenges Wal-Mart is facing are well known. It is suffering from a poor brand image in the United States and is losing market share to rivals.

At the end of the third quarter, Berkshire held 56.2 million shares of Wal-Mart, down from around 60.4 million at the end of the previous quarter.

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