Buffett's Berkshire Hathaway Discloses Stake in Kinder Morgan

Warren Buffett's Berkshire Invests in Kinder Morgan
  • Kinder Morgan shares jump in extended trading in New York
  • Stake was 26.5 million shares as of Dec. 31, filing shows

Warren Buffett’s Berkshire Hathaway Inc. added an investment in Kinder Morgan Inc. during the fourth quarter, snapping up shares of the pipeline operator as its market value plunged.

Berkshire held 26.5 million shares of the company as of Dec. 31, according to a regulatory filing Tuesday disclosing U.S. stock holdings. The stake was valued at $395.9 million at the end of 2015.

Kinder Morgan’s shares fell 65 percent last year amid a slump in energy prices. The company, which hauls oil and gas through a pipeline network long enough to circle the globe three times, slashed its dividend in December for the first time to avoid a credit downgrade to junk status. The Houston-based company also said last month that it may sell assets to raise cash.

“It strikes me as a business that’s right up his alley,” said Jeff Matthews, an investor and author of Buffett-related books. “It’s a business that’s going to last for a long time,” he said. And the stock has “gotten crushed,” creating an opportunity to buy at an attractive price.

Oil drillers, gold miners and rig operators have sacrificed dividends to conserve cash amid tumbling prices in oversupplied commodity markets. When Kinder Morgan cut its dividend, it pledged not to issue any new shares through the end of 2018.

Shares Jump

Kinder Morgan jumped 7.5 percent to $16.79 at 6:50 p.m. in extended trading in New York.

Berkshire’s portfolio is closely watched by investors for clues into how the billionaire chairman and his backup stock pickers are thinking. Newly disclosed holdings often send shares higher.

One of Buffett’s deputy investment managers, Todd Combs or Ted Weschler, could be responsible for the investment. Both have been building portfolios at Berkshire and tend to make smaller bets than their boss.

“Our guess is that it’s Todd or Ted,” said Tony Scherrer, director of research at Smead Capital Management, which oversees about $2.1 billion including Berkshire shares. “It’s not insignificant, but it doesn’t smell like a straight-up Buffett move to us.”

Energy Bets

Other closely watched investment managers added holdings in the energy industry during the fourth quarter. David Tepper’s Appaloosa Management bought shares of Kinder Morgan and Energy Transfer Partners LP, while Seth Klarman’s Baupost Group increased its positions in Antero Resources Corp., an oil and gas producer, and Cheniere Energy Inc.

Another opportunity Buffett, 85, has seen recently is Houston-based Phillips 66. Berkshire disclosed in August that it held more than 10 percent of the oil refiner’s stock and has boosted its stake with regular purchases this year.

During the fourth quarter, Berkshire pared its holding in AT&T Inc. by 12.7 million shares, leaving a stake valued at $1.6 billion at the end of 2015. Weschler and Combs were among the largest investors in DirecTV, which was purchasedby AT&T last year.

Berkshire made a small addition to its Wells Fargo & Co. holding and sold its remaining 1.98 million shares in Chicago Bridge & Iron Co. Once the largest investorin the engineering-and-construction firm, Berkshire began paring the stake last year.