BY Richard Summerfield
Fresh on the heels of the firm’s $32bn acquisition of Precisions Castparts, Berkshire Hathaway has announced that is has a taken a $4.48bn stake in oil refiner Phillips 66, making it the company’s biggest shareholder.
According to a filing made with the US Securities and Exchange Commission on Friday evening, Berkshire has amassed a 57.98 million share, or 10.8 percent stake in the company. The move marks a return to the business after divesting two-thirds of its stake last February.
In 2014, Berkshire traded a significant portion of its stake in the Phillips 66 unit for a chemical-business investment which was subsequently absorbed by Berkshire’s Lubrizol division.
However, Berkshire is believed to have begun rebuilding its holding in Phillips 66 in the second quarter of 2015, when it bought $3.09bn worth of equities in the firm. As a result of the conglomerates announcement, Phillips shares closed Friday at $77.23.
Since Berkshire traded away the majority of its holding in Phillips, the firm has continued to blossom. Since the spinoff, Phillips stock has more than doubled in value.
Berkshire’s disclosure underlines its belief that the energy sector is likely to be a growth area. This is Berkshire’s most significant energy investment in around two years, though it only represents a mid range investment by Berkshire’s standards. The conglomerate, which has a diverse portfolio of over 80 firms, typically takes much larger holdings, including $20bn stakes in Wells Fargo & Co. and Kraft Heinz Co. The firm also has a $10bn holding in Coca Cola and IBM.
Berkshire hopes that low oil prices will continue to drive demand for gasoline, diesel and other petroleum products. This demand has been ably demonstrated in the US over the last 12 months; since prices began to tumble last year, gasoline demand in the US has climbed to an eight year high. Following the company’s outlay in Phillips 66, Berkshire will hope this demand continues to grow.