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General Category => Berkshire Hathaway => Topic started by: ajc on November 14, 2013, 02:04:22 PM

Title: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ajc on November 14, 2013, 02:04:22 PM
"Warren Buffett's conglomerate Berkshire Hathaway owned a stake of about 40 million shares in oil major Exxon Mobil as of the end of September, according to an SEC filing on Thursday.

Based on the most recently available holdings data, that would be enough to make Berkshire the 6th-biggest holder of Exxon shares, with about one percent of the shares outstanding.

The stake was worth $3.74 billion at Thursday's closing prices..."

http://www.cnbc.com/id/101128782 (http://www.cnbc.com/id/101128782)
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: CorpRaider on November 14, 2013, 02:33:39 PM
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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Palantir on November 14, 2013, 03:39:16 PM
I was looking at it too.... I like its cannibalistic tendencies.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Aberhound on November 14, 2013, 08:23:33 PM
The longer I hold it the more I like management. Gains are lumpy but average out well over time. Through Esso they have produced oil at Norman Wells for decades past when the oil was supposed to run out. I wonder how many of their holdings are like that.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: bmichaud on November 14, 2013, 11:19:01 PM
I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :)

XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation.

I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count.

Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: boilermaker75 on November 15, 2013, 05:23:12 AM
I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :)

XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation.

I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count.

Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time.

I agree about MCD. It is a long-term holding for me.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: giofranchi on November 15, 2013, 05:37:48 AM
Not sure why WEB wasn't buying in 2010 when it was below $60....

I bought it then! Later I sold it booking substantial profits. Probably, a bad decision… but, really, what do I know about something so BIG?!

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
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: rkbabang on November 15, 2013, 06:27:40 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: boilermaker75 on November 15, 2013, 07:44:22 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: blainehodder on November 15, 2013, 08:03:45 AM
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: watsa_is_a_randian_hero 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: txlaw 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: rkbabang 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: jay21 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wachtwoord 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?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: gfp on November 15, 2013, 09:19:35 AM
WEB = Warren E. Buffett
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ItsAValueTrap 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: rkbabang 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Uccmal 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. 
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: petec 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.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: CorpRaider on November 15, 2013, 10:19:36 AM
Yeah, I almost think of them as a disciplined energy focused investment banking/PE shop (the PE thing because of operational capabilities they can bring).  If one thought there were likely to be lots of opportunities in this space, they would probably be one of the best jockey stocks, especially if you have to put $4 billion to work as an initial position.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: oddballstocks on November 15, 2013, 10:54:40 AM


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

This is what I see, fewer and fewer companies that he can put any amount of cash into.  I'm not sure if there's even that much for us mere mortals who don't have billions to invest. 

Of the nine thing he can invest in anymore I guess Exxon was the best right now, I don't know if there's anything we can read into or get out of the deal for ourselves.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Palantir on November 15, 2013, 10:56:08 AM
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.

Why would you be preparing for an "inflationary environment"? It seems bizarre to base an investment case on "beating inflation".
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wescobrk on November 15, 2013, 11:01:26 AM
In the partnership days and even into the 80's he bought everything half off or more, now it seems the best he can do is buy dollar bills for 90 cents.
It's been pointed out his universe is so small now with a near 300 billion market cap.
A nice problem to have but obviously returns will be pretty pedestrian in the future (as he has warned) especially since he thinks its reasonable float has probably peaked and may start to decline slightly.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wescobrk on November 15, 2013, 11:03:41 AM
When bac hits 20 a share his massive 9 billion profit is a measly 3 percent of the current market cap.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ERICOPOLY on November 15, 2013, 11:07:34 AM
When bac hits 20 a share his massive 9 billion profit is a measly 3 percent of the current market cap.

He could have bought a lot more, and he still can.  Can't he buy until he gets up to a 10% total ownership stake?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wellmont on November 15, 2013, 11:08:00 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.

as a generalization of a theory, the point may have some merit. but when you look at real data, xom was $1.50 in 1978 and it's over $95 today. plus all the dividends. Demolished the s & p and of course the inflation rate. in an inflationary world xom "rules".
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wellmont on November 15, 2013, 11:13:30 AM
In the partnership days and even into the 80's he bought everything half off or more, now it seems the best he can do is buy dollar bills for 90 cents.
It's been pointed out his universe is so small now with a near 300 billion market cap.
A nice problem to have but obviously returns will be pretty pedestrian in the future (as he has warned) especially since he thinks its reasonable float has probably peaked and may start to decline slightly.

true it won't grow as fast. but it will continue to be an excellent store of value and great inflation hedge. if there is nothing to buy he will not buy. he will shift focus to buying 100% of large businesses, he will look at where his own stock is trading, and or consider dividends.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wellmont on November 15, 2013, 11:14:42 AM
When bac hits 20 a share his massive 9 billion profit is a measly 3 percent of the current market cap.

I don't think he likes bac nearly as much as wfc. he took advantage of a special situation. notice he never bought any common.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wescobrk on November 15, 2013, 11:16:48 AM
"He could have bought a lot more, and he still can.  Can't he buy until he gets up to a 10% total ownership stake?"

I believe he can but I think it's virtually zero probability he will.
The only financial he adds to is wells.
I guess anything is possible if it drops below tbv but my guess he won't ever buy common and he will defer the exercise to 2021 unless there is a large dividend as he said recently in an interview.
If he is still alive he might exercise just the amount that he doesn't have to put any up front cash if he follows his GE and Goldman plays.

That will probably go to his successor unless he can live past his early 90's.

On a selfish note, I hope bac drops back to tbv before ccar so I can load up again for the annual pop.
I realize it seems unlikely as the market should discount that in and not drop but mr market tends to do things like that.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ERICOPOLY on November 15, 2013, 11:25:31 AM
On a selfish note, I hope bac drops back to tbv before ccar so I can load up again for the annual pop.
I realize it seems unlikely as the market should discount that in and not drop but mr market tends to do things like that.

We already did that.  Last week it traded down to 3 cents above tangible book value.

Look at a 1 yr chart -- it was right about now a year ago that it took off. 

http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart

So, been there and done/doing that.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wescobrk on November 15, 2013, 11:30:45 AM


"Look at a 1 yr chart -- it was right about now a year ago that it took off. 

http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart

So, been there and done/doing that."

I know! I posted that I would buy more and you responded it was at tbv.
That was a few days ago.
My point is I'm ready to do it again!
As mike said in rounders, "I can bust you up all day long" (to KGB at the end of the movie)
I can bust up the S&P all day if it keeps doing that with bac:)
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Uccmal on November 15, 2013, 01:02:55 PM


"Look at a 1 yr chart -- it was right about now a year ago that it took off. 

http://finance.yahoo.com/q/bc?s=BAC+Basic+Chart

So, been there and done/doing that."

I know! I posted that I would buy more and you responded it was at tbv.
That was a few days ago.
My point is I'm ready to do it again!
As mike said in rounders, "I can bust you up all day long" (to KGB at the end of the movie)
I can bust up the S&P all day if it keeps doing that with bac:)


It has been a great trading stock.  I bought last week, and sold at least the same amount the last three days.  Tax time is going to be hell, but there are worse problems.  Now for the bad news....pleeeze!
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on November 15, 2013, 02:15:29 PM
I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: nodnub on November 15, 2013, 04:30:36 PM
I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion?

WEB is going for the classic pump and dump scheme.  Watch out for him pumping XOM on CNBC next week.   ;D
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: vinod1 on November 15, 2013, 05:11:03 PM
I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion?

I guess that is pretty much close to the position size he wanted. He also said he wanted to invest about $10 billion in IBM and I think he disclosed the position once he got close to that limit.

Vinod
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on November 15, 2013, 05:25:11 PM
I wonder why he disclosed the position at $3.7 billion instead of keeping it a secret. Given all the talk about size, and since he doesn't believe in making small investments, why not build it up secretly to $10-20 billion?

I guess that is pretty much close to the position size he wanted. He also said he wanted to invest about $10 billion in IBM and I think he disclosed the position once he got close to that limit.

Vinod

Yea I guess so, but I'm wondering why that would be the case given the very limited universe of ideas there is, and less than a handful of those that Warren "understands, with a good management, and good price". Also he doesn't like to diversify; and this is less than 1% of Berkshire's assets.

Just curious of course; I'm sure he has a good reason.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: twacowfca on November 17, 2013, 05:50:21 AM
I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :)

XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation.

I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count.

Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time.

He has owned it for a few years.  He bought some after he became disenchanted with Conoco Phillips.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Charlie on November 17, 2013, 07:37:10 AM
"Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time."

I think MCD is not a top holding, because eating habits change more than drinking habits and MCD owns a lot of real estate.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ItsAValueTrap on November 17, 2013, 08:41:42 AM
Buffett owned McDonald's in the past and sold out when blue chips were fetching really high valuations a little over a decade ago.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: bmichaud on November 17, 2013, 10:55:08 AM
I think MCD is not a top holding, because eating habits change more than drinking habits and MCD owns a lot of real estate.


That's probably right regarding habits, but to the degree that would imply that is why WEB avoids it,
I'm not so sure about. MCD has grown 6% a year for a very long time while returning over 80% of earnings to shareholders, thus implying extremely durable moat. Perhaps KO is at 7% and 90%?? Not sure. But the difference is negligible, especially from a valuation perspective when MCD was under operational pressure in the early 2000s. 

Are you saying the RE is a negative for MCD from WEB's perspective?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: racemize on November 17, 2013, 12:55:12 PM
I have heard him say that there's no taste memory for soda (applied to KO) whereas there is taste memory for burgers (applied to MCD).  Not sure how much that is really influencing the decision though.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: wellmont on November 17, 2013, 12:58:15 PM
I don't think it's about burgers. I think it's about the company. He owns dairy queen. doesn't own mickeyDs.  He's very choosy about where he puts his money. For example, he owns tons of WFC in brk. But only owns some JPM in his PA.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ItsAValueTrap on November 17, 2013, 01:07:04 PM
If you look at the history of the restaurant industry, the top #10 list changes rapidly over the decades.  The wonderful business don't always stay wonderful.  I think that the restaurant business is highly management-driven.

With consumer foods, the top #10 list doesn't change nearly as much.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on November 17, 2013, 02:38:21 PM
In a speech once (I think at University of Florida - it's on YouTube), someone asked him this and he compared KO and MCD. He said he likes KO better because it has better pricing power. He said MCD has to give out prize goodies (such as happy meals) in order to drive customers in, and to that degree Burger King has to do the same, and in that way they are very competitive with each other. In that same speech he mentioned how Cola has no taste memory.

EDIT: Here's the speech. http://www.youtube.com/watch?v=DfuXKpMFUjc
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: WhoIsWarren on November 17, 2013, 02:40:09 PM
If you look at the history of the restaurant industry, the top #10 list changes rapidly over the decades.  The wonderful business don't always stay wonderful.

That's an interesting observation.....one that I wouldn't have guessed if you'd asked me.  Can you point me to where I might read some more about this?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Charlie on November 17, 2013, 07:04:17 PM
"Are you saying the RE is a negative for MCD from WEB's perspective?"

yes, ROE of real estate is not good.

Buffett owned McDonald´s probably when there was a lot of growth ahead.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: fareastwarriors on November 19, 2013, 01:18:27 PM
http://blogs.barrons.com/focusonfunds/2013/11/19/buffett-likes-exxon-chanos-sees-value-trap/?mod=BOLBlog?mod=BOL_article_full_blog_etf (http://blogs.barrons.com/focusonfunds/2013/11/19/buffett-likes-exxon-chanos-sees-value-trap/?mod=BOLBlog?mod=BOL_article_full_blog_etf)

Buffett Likes Exxon? Chanos Sees ‘Value Trap’
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: fareastwarriors on November 20, 2013, 09:00:35 AM
http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html (http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html)


Warren Buffett's Exxon Bungle
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: enoch01 on November 20, 2013, 09:23:48 AM
http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html (http://www.bloomberg.com/news/2013-11-20/warren-buffett-s-exxon-bungle.html)


Warren Buffett's Exxon Bungle

Haha, he can't be serious.

Quote
Regardless, not counting dividends, that original ~$173 million dollar purchase would be worth about $3 billion today. That’s a back of the envelope return of 1,946 percent. And while a 44 percent return is good, a 1,946 percent return is better.

XOM has compounded about 11% per year since Buffett's sale in 1985.  What's the problem again?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: muscleman on November 26, 2013, 11:13:42 PM
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: blainehodder on November 27, 2013, 06:24:54 AM
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?

Earnings Before Interest and Tax/Total Enterprise Value.  You could go further up the income statement to EBITDA yield, but I prefer EBIT when running loose screens (uses depreciation as a proxy for capital deterioration, which as we know isn't true).  Papers that I have seen seem to show it is roughly a wash on performance between the 2 stats.


Enterprise level metrics show superior correlation to results as they normalize for leverage. P/E and for that matter book/market screens give an "unfair advantage" to levered up firms. Finally book screens don't seem to work well on mid-large cap stocks in practice.


Return on Capital seems to add some juice, as Greenblatt claims in the Little Book.  The Magic formula ranks stocks on a 50/50 factor of ROC and EBIT/EV... but, you should know that Tobias Carlisle contends that the cheapest value decile stocks, ranked by ROC, should outperform the seemingly random 50/50 factor that Greenblatt has chosen.

At some point of course, over fitting may be an issue, but I suspect Tobias is closer to the truth, hence my comment on XOM.


Perhaps we should move this discussion to another thread.  I do think it would be valuable to discuss apples/apples metrics though.  I have noticed quite a bit of confusing ratios that cross compare firm, value, and equity level metrics.  Each metric can of course be useful, but only as long as you are comparing apples to apples, if you follow what I mean.

EDIT: Oops...I realize you may just be looking for the XOM EBIT/ev yield?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Dazel on November 27, 2013, 07:58:06 AM



Buffett inherited mcDonalds from the his General Re take over they had a huge position built up on it....he sold it off..he makes fun of him self for doing so...was not his Pick.

However, the reality is that McDonalds fell to $11 a share in 2003...and it was going out of business etc...even Fairfax bought it then and sold it at $17...silly in hind sight...I did not buy it or Apple that traded for net cash just before that...

Obvious big mistakes! I think Exxon is small hedge on oil prices with a yield to wait.

Dazel.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: fareastwarriors on December 02, 2013, 11:36:03 AM
http://seekingalpha.com/article/1869721-its-not-so-much-why-buffett-bought-exxon-mobil-its-why-he-bought-it-now (http://seekingalpha.com/article/1869721-its-not-so-much-why-buffett-bought-exxon-mobil-its-why-he-bought-it-now)


It's Not So Much Why Buffett Bought Exxon Mobil, It's Why He Bought It Now
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: CorpRaider on December 11, 2013, 05:11:20 AM
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?

Earnings Before Interest and Tax/Total Enterprise Value.  You could go further up the income statement to EBITDA yield, but I prefer EBIT when running loose screens (uses depreciation as a proxy for capital deterioration, which as we know isn't true).  Papers that I have seen seem to show it is roughly a wash on performance between the 2 stats.


Enterprise level metrics show superior correlation to results as they normalize for leverage. P/E and for that matter book/market screens give an "unfair advantage" to levered up firms. Finally book screens don't seem to work well on mid-large cap stocks in practice.


Return on Capital seems to add some juice, as Greenblatt claims in the Little Book.  The Magic formula ranks stocks on a 50/50 factor of ROC and EBIT/EV... but, you should know that Tobias Carlisle contends that the cheapest value decile stocks, ranked by ROC, should outperform the seemingly random 50/50 factor that Greenblatt has chosen.

At some point of course, over fitting may be an issue, but I suspect Tobias is closer to the truth, hence my comment on XOM.


Perhaps we should move this discussion to another thread.  I do think it would be valuable to discuss apples/apples metrics though.  I have noticed quite a bit of confusing ratios that cross compare firm, value, and equity level metrics.  Each metric can of course be useful, but only as long as you are comparing apples to apples, if you follow what I mean.

EDIT: Oops...I realize you may just be looking for the XOM EBIT/ev yield?

I use this metric a lot as a screen for companies to monitor/check out.  Maybe layer on a subjective opinion on management and get really interested if there is a catalyst.  That's what put me on to OXY to begin with.  CVX and XOM were ranked highly as well. 
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: fareastwarriors on December 12, 2013, 11:53:41 AM
http://online.wsj.com/news/articles/SB10001424052702304202204579252393756212898?mod=Business_newsreel_4 (http://online.wsj.com/news/articles/SB10001424052702304202204579252393756212898?mod=Business_newsreel_4)

Exxon Presses for Exports

U.S.'s Largest Energy Producer Says North America Has Abundant, Long-Lasting Fuel Supplies


Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: boilermaker75 on December 13, 2013, 03:23:12 AM
"Are you saying the RE is a negative for MCD from WEB's perspective?"

yes, ROE of real estate is not good.

Buffett owned McDonald´s probably when there was a lot of growth ahead.

From the 1998 letter to shareholders, "In particular, my decision to sell McDonald's was a very big mistake."
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: fareastwarriors on January 29, 2014, 01:03:28 PM
Big Oil Companies Struggle to Justify Soaring Project Costs

Chevron, Exxon and Shell Spent More Than $120 Billion in 2013 to Boost Oil and Gas Output, but Production Is Down





http://online.wsj.com/news/articles/SB10001424052702303277704579348332283819314?mod=WSJ_hp_EditorsPicks (http://online.wsj.com/news/articles/SB10001424052702303277704579348332283819314?mod=WSJ_hp_EditorsPicks)
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: ScottHall on March 09, 2015, 09:20:25 PM
I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :)

XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation.

I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count.

Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time.

Lmao

Nice analysis.

You, of course, have never picked a losing stock in your life. ;D
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on March 22, 2015, 12:50:02 PM
Of course I have, but I've never bragged about Buffett (or any other top investor) buying a stock because of my analysis. His analysis, frankly, was quite garbage.

And that line about MCDs made my day. What a clown.

Of course hindsight is 20/20 eh. But to invest in companies with those fundamentals..how can you call yourself a value investor and do that I do wonder.

Pretty sure that was a joke about Buffett reading his analysis.

I don't get how he's a clown for wondering why Buffett doesn't own MCD.

So basically you chastise Buffett for investing in XOM as well, with the line "how can he call himself a value investor"?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Range on March 22, 2015, 02:45:48 PM
Of course I have, but I've never bragged about Buffett (or any other top investor) buying a stock because of my analysis. His analysis, frankly, was quite garbage.

And that line about MCDs made my day. What a clown.

Of course hindsight is 20/20 eh. But to invest in companies with those fundamentals..how can you call yourself a value investor and do that I do wonder.

Pretty sure that was a joke about Buffett reading his analysis.

I don't get how he's a clown for wondering why Buffett doesn't own MCD.

So basically you chastise Buffett for investing in XOM as well, with the line "how can he call himself a value investor"?

+1

Plus, XOM is down about 5% (when you account for dividends) since bmichaud made his comment while oil prices have dropped about 55%. 

Such a terrible pick!!!
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on March 22, 2015, 03:21:13 PM
Of course I have, but I've never bragged about Buffett (or any other top investor) buying a stock because of my analysis. His analysis, frankly, was quite garbage.

And that line about MCDs made my day. What a clown.

Of course hindsight is 20/20 eh. But to invest in companies with those fundamentals..how can you call yourself a value investor and do that I do wonder.

Pretty sure that was a joke about Buffett reading his analysis.

I don't get how he's a clown for wondering why Buffett doesn't own MCD.

So basically you chastise Buffett for investing in XOM as well, with the line "how can he call himself a value investor"?

+1

Plus, XOM is down about 5% (when you account for dividends) since bmichaud made his comment while oil prices have dropped about 55%. 

Such a terrible pick!!!

lol

It's so ridiculous to see a guy with 23 posts come on here and start throwing insults to long standing members. Not to mention the criticism isn't even deserved in this case.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: bmichaud on March 22, 2015, 04:04:48 PM
Not only was it a joke (what anonymous online medium isn't primarily) XOM literally could not have been a better "value" investment with oil down almost 50%.

And since we are using 20-20 vision, please go back to late the 2013/early 2014 Sandridge Energy (SD) thread for my "analysis" on why DVN was a far and away superior investment to SD at the time given the downside protection its balance sheet and valuation would provide in this environment...

Honestly don't even know what to say about McDonalds LOL.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: petec on March 23, 2015, 08:32:55 AM
YES because the more you post, the more correct you are...


No, but:

1) I thought it was fairly obvious that bmichaud was joking re: Buffett taking his advice and recognising that would have helped you avoid irritating people when you (I hope) didn't intend to.

2) slagging off someone else's analysis without providing any of your own doesn't earn you a lot of respect in most places (especially here, where many of us have come to respect bmichaud's thoughts).

P
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: Mephistopheles on March 23, 2015, 09:24:05 AM

Quote
So basically you chastise Buffett for investing in XOM as well, with the line "how can he call himself a value investor"?

Given how Buffett sold out his XOM stake, I don't think I would be the only one chastising him for the purchase...


On second thought, you're right on this one. How the hell Buffett goes around claiming to be a value investor after daring to invest in a horrendous business such as XOM, I don't know. That Buffett is the greatest value investor of all time is the greatest misconception of modern times. The man is an outright scam.

Disclosure: Short XOM and BRK.A
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: karthikpm on March 23, 2015, 05:17:34 PM
Mephistopheles

Warren claims to invite a bear on Berkshire to their panel at the AGM... Ever considered going ?
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: merkhet on March 23, 2015, 05:59:48 PM
Mephistopheles

Warren claims to invite a bear on Berkshire to their panel at the AGM... Ever considered going ?

Mephistopheles is being sarcastic.
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: karthikpm on March 23, 2015, 07:23:01 PM
Mephistopheles

Warren claims to invite a bear on Berkshire to their panel at the AGM... Ever considered going ?

Mephistopheles is being sarcastic.

I was just playing along  ;D
Title: Re: Buffett takes $3.7 billion stake in Exxon Mobil
Post by: merkhet on March 23, 2015, 07:32:10 PM
Mephistopheles

Warren claims to invite a bear on Berkshire to their panel at the AGM... Ever considered going ?

Mephistopheles is being sarcastic.

I was just playing along  ;D

Damn, hoodwinked, lol.