Is Warren Buffett trying to prop up oil?

January 21, 2016

For someone who isn’t exactly known for talking his book, the Oracle of Omaha is sure doing a lot of that lately. How else to explain these 8 Form 4s filed since the beginning of the year? Each of the filings disclose that Buffett has been actively adding to his already hefty stake in Phillips 66.

Just to put those 8 Form 4s into perspective, in 2015, Berkshire Hathaway filed 3 Form 4s for the entire year.

A quick search of Berkshire’s 13Fs shows that it has made regular use of the “Confidential Treatment” rule that allows high-profile investors (like Buffett) from having to disclose certain positions in their routine quarterly filings for a number of months. That’s certainly what Buffett did with his investment in International Business Machines. Though the buying was done during the first quarter of 2011, a confidential treatment request made it invisible to others until this amended 13F was filed on Nov. 14, 2011. Granted, Buffett is hardly the only prominent investor to regularly take advantage of CT requests. But it certainly shows that someone at the company knows how to use disclosure rules pretty effectively to suit their purposes.

Given that Phillips 66 is the subject of each of those eight filings, you have to wonder if it has something to do with Buffet’s attempt to do something about the sagging price of oil. On Wednesday, oil closed at under $27 a barrel, a price last seen in 2003, according to this CNBC video clip.

At the end of the third quarter, Berkshire’s 13F showed that it owned about 4.7 billion shares of Phillips 66. But over the past two weeks, they’ve bought an additional 8 million shares. The first disclosure, made on Jan. 6, showed Berkshire buying the stock at prices ranging from $79.47 to $80.18. The most recent one — filed on Tuesday — shows that the buying continued through Jan. 14. As a reminder, Form 4s must be filed within two days of the purchase.

Berkshire’s next 13F isn’t due until February 16, and that filing only covers purchases made through Dec. 31. That means that Buffett would not be required to publicly disclose these purchases until mid-May. (Correction: my buddy and Form 4 expert Ben Silverman at InsiderScore pinged me to let me know that because Berkshire’s stake in Phillips exceeded 10% as of the Nov. filing, he was required to file those Form 4s). So my interpretation that this was a voluntary disclosure was not accurate. We apologize for this mistake).  So the idea that they’re being voluntarily disclosed now hardly seems like some sort of coincidence.

As we say all the time, there are no accidents in SEC filings. Everything is usually there for a reason…even if you have to read between the lines.

Posted in: Current Events, Disclosures

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Companies Mentioned: Berkshire Hathaway Inc., Phillips 66,
4 Replies to "Is Warren Buffett trying to prop up oil?"
  1. tony b writes:
    January 21, 2016

    Oil is a trillion dollar commodity market . . . how exactly is disclosing purchases of a single oil company an “attempt to do something” about the price of oil?

  2. Michelle Leder writes:
    January 21, 2016

    Agreed, but I’d argue that Buffett has outsized influence and when people see him buying, it typically sends a signal. Lots of people spend a lot of time looking at Berkshire’s Form 4s and 13Fs trying to glean details. To me, the fact that he has filed 8 Form 4s this year and only 3 in all of 2015 speaks volumes about what’s going on here. He didn’t need to disclose until May, yet they are choosing to do so now. That can’t possibly be an oversight or a coincidence.

  3. Justin writes:
    January 21, 2016

    Much like his October 2008 “Buy America; I am” letter to the NYT, Buffett’s just talking his book. If he really wanted to accumulate PSX on the cheap, he never would have announced it before he had to. He stands to gain way more from increasing oil rail traffic on BNSF than on some incremental positions in a mid-stream asset play.

  4. Tony B writes:
    January 21, 2016

    He may very well be signaling that he thinks PSX is a good investment but the article claims that he is attempting to affect the price of oil. Phillips 66 doesn’t even benefit from elevated oil prices . . . it is a midstream/downstream refining and chemicals company. As per it’s most recent 10-K: “We do not produce crude oil and must purchase all of the crude oil we process.” If he was trying “to do something about the sagging price of oil” wouldn’t he disclose a stake in an E&P company that benefits from high oil prices or is that just part of the conspiracy?

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