Author Topic: Buffett takes $3.7 billion stake in Exxon Mobil  (Read 27688 times)

watsa_is_a_randian_hero

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 800
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #10 on: November 15, 2013, 08:05:13 AM »
I have $100 and $95 LEAPS I bought 2 years ago, expiring in 2 months.  I assumed they would expire worthless...they actually have a chance now of making money.


txlaw

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3081
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #11 on: November 15, 2013, 08:25:33 AM »
Does anyone remember how Chanos was saying to short XOM because it's a liquidating trust?  I wonder if he's still negative on XOM's prospects.

rkbabang

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4350
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #12 on: November 15, 2013, 08:51:20 AM »
Interesting.  I bought XOM in 2010 for $59 then sold a little more than a year ago for $88.  Unlike the market in general it hasn't done much in the last year.  It doesn't look undervalued to me right now the way it did in 2010.  I'd rather own BRK than follow him back into XOM.

After seeing XOM was the secret stock, I took a quick look this morning and it does seem expensive. An enterprise value of $392B with a TTM FCF of $12.6B. Capital expenditures seem to eat a lot of the operating earnings each year. FCF was $40B in 2008, but the highest it has been since then was $24.4B in 2011.

I'm sure it will be a home run for Buffett, but I don't know why.

I understand why he would want to own XOM, I'm just not sure why he is buying it now.  He's getting a great company at a fair price, I'd rather see him get a great company at a great price.  But then again, in 20 years it won't matter if BRK bought it at $60 or $100, it will be still be a great investment.  I may own some amount of BRK for 20 years, but I don't usually hold my other stocks very long.  Once they are fairly valued I start looking elsewhere.  I suppose it is different if you are managing many $Billions.

jay21

  • Hero Member
  • *****
  • Posts: 1217
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #13 on: November 15, 2013, 09:10:02 AM »
Interesting.  I bought XOM in 2010 for $59 then sold a little more than a year ago for $88.  Unlike the market in general it hasn't done much in the last year.  It doesn't look undervalued to me right now the way it did in 2010.  I'd rather own BRK than follow him back into XOM.

After seeing XOM was the secret stock, I took a quick look this morning and it does seem expensive. An enterprise value of $392B with a TTM FCF of $12.6B. Capital expenditures seem to eat a lot of the operating earnings each year. FCF was $40B in 2008, but the highest it has been since then was $24.4B in 2011.

I'm sure it will be a home run for Buffett, but I don't know why.

I understand why he would want to own XOM, I'm just not sure why he is buying it now.  He's getting a great company at a fair price, I'd rather see him get a great company at a great price.  But then again, in 20 years it won't matter if BRK bought it at $60 or $100, it will be still be a great investment.  I may own some amount of BRK for 20 years, but I don't usually hold my other stocks very long.  Once they are fairly valued I start looking elsewhere.  I suppose it is different if you are managing many $Billions.

I am sure that Buffett has some micro insight that I don't, but looking at the macro backdrop, this company couldn't this be a great inflationary investment assuming that they are a cannibal as another poster suggested?

Their product will increase its price in an inflationary environment.

They are issuing expensive debt that will decrease in value in an inflationary environment to buy fairly priced stock that could appreciate in an inflationary environment.

I don't have any insight into XOM so I could be wrong.
@jay_21_

wachtwoord

  • Hero Member
  • *****
  • Posts: 1380
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #14 on: November 15, 2013, 09:16:53 AM »
Damn!! As time passes, I find my circle of competence shrinking instead of getting larger… Because I keep requiring to know more and more about a business, before accepting it inside… The net result is an “outflow” of businesses from my circle of competence, instead of an “inflow”… ???

Gio

Read this: http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect :) (Dunning-Kruger effect)

That's big enough that its probably a WEB buy, no?  Looks like Yacktman has been buying as well.  Bmichaud and I were just talking about XOM…probably while he was buying.  I sucked my thumb.  Oh well.

What is a WEB buy?
« Last Edit: November 15, 2013, 09:19:00 AM by wachtwoord »
"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

gfp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1809
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #15 on: November 15, 2013, 09:19:35 AM »
WEB = Warren E. Buffett

ItsAValueTrap

  • Hero Member
  • *****
  • Posts: 1945
    • Blog
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #16 on: November 15, 2013, 09:32:16 AM »
I think i'd rather own exxon mobil over 95% of the independent oil and gas companies out there.  (But that's mostly because independent oil and gas is awful.)

Management is very good, they don't use debt as a crutch, and they are buying back shares.

Their free cash flow is probably poor because they are plowing cash back into more production capacity.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " -Buffett

my blog

rkbabang

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4350
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #17 on: November 15, 2013, 09:56:31 AM »
I think i'd rather own exxon mobil over 95% of the independent oil and gas companies out there.  (But that's mostly because independent oil and gas is awful.)
Management is very good, they don't use debt as a crutch, and they are buying back shares.
Their free cash flow is probably poor because they are plowing cash back into more production capacity.

I agree. Tesla and Solar City aside, oil is going to be with us for a long time and the price will only increase (long term).  This is more of a "hmm that's interesting" than a "WTF?" purchase.   I think it will work out well.   It's not like he's buying a failed handset maker or a textile mill in New Bedford or something.

Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3728
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #18 on: November 15, 2013, 10:01:52 AM »
I think i'd rather own exxon mobil over 95% of the independent oil and gas companies out there.  (But that's mostly because independent oil and gas is awful.)

Management is very good, they don't use debt as a crutch, and they are buying back shares.

Their free cash flow is probably poor because they are plowing cash back into more production capacity.

I concur.  The very biggest integrateds can buy good assets when they need to add reserves.  They can cherry pick among the smaller companies.  I dont own Exxon.  If I wanted exposure to O&G it would be on my short list.  I see it as an energy company rather than an oil company.  As alternatives become a greater piece of the pie XOM will just redirect cash flow that way.  I wonder if this is what Buffett sees.  He would certainly have a good handle on the sector via Mid-American. 

He is also reaching the end game.  The list of acquisitions that will move the needle is getting ever smaller. 
GARP tending toward value

petec

  • Hero Member
  • *****
  • Posts: 1827
Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #19 on: November 15, 2013, 10:19:24 AM »
I don't think you get a bonus point for oil as an inflation hedge because you need to continually reinvest to maintain production and inflation hits capex hard.   Inflation hedges work when your revenues rise over an existing asset base, not one that needs replenishing.

Other than that, A1 company in a C3 industry.