Berkshire to increase holdings in Kinder Morgan

By Staff Writer

Feb 17, 2016 09:40 AM EST

Berkshire Hathaway, a US-based multinational conglomerate, made a significant investment in the energy firm Kinder Morgan during the last three-month period of 2015, thereby increasing its bet on the crude oil market. The market value of the pipeline giant jumped following the news.

As of December 31, Berkshire owned 26.5 million shares of Kinder Morgan, Bloomberg said quoting a regulatory filing that revealed stock holdings in the US. The value of Kinder Morgan stake was $395.9 million at 2015 end.

In 2015, the shares of Kinder Morgan dropped nearly 65% in a period when there was a crash in energy prices. In December, the Houston-based energy firm trimmed its dividend in order to escape lower credit. Last month, the pipeline operator announced that it might sell some assets to increase its capital. The company also promised to avoid allotting fresh shares through 2018 end.

Major rig operators, gold miners and oil drillers globally have shelved their dividends to preserve the existing capital amid collapsing crude prices in the commodity market that has plenty of supplies from energy producers. Investors around the world are closely monitoring Berkshire's activities with an aim to gauge the ideas of "the billionaire chairman" and his supporters.

Either Ted Weschler or Todd Combs, deputy portfolio managers of Warren Buffet, could be responsible for Kinder Morgan investment. They are responsible for constructing huge stock portfolios at the company and are also inclined to commit smaller bets than their chief.

There seems to be an oceanic bets in the energy sector as more investors enter the arena by boosting their holdings in the oil market during the final quarter of 2015. Major investors in the oil sector include Appaloosa Management, managed by David Tepper, that purchased shares of Energy Transfer partners LP and Kinder Morgan, while Baupost Group, controlled by Seth Klarman, improved its holdings in Cheniere Energy and Antero Resources Corp.

Moreover, Berkshire Hathaway sold nearly 12.7 million AT&T shares in the final three-month period of 2015, bringing its total stake in the company to $1.6 billion as of December 31, according to THE WALL STREET JOURNAL. In addition, Berkshire increased its holdings in Well Fargo & Co to $26.1 billion after its purchase of 9.41 million shares in the company.

Berkshire also kept its holdings in major companies like International Business Machines Corp, Kraft Heinz Co and Coca-Cola. Berkshire's holdings in these firms lift its stock portfolio to over $50 billion.

Reuters said that Berkshire invested $1.08 billion on the shares of Phillips 66 in 2016. This move boosted Berkshire's stake by 14.3% that currently valued around $5.91 billion. Kinder Morgan shares were up 6.9% to $16.70 in the after-hours trading session. The shares ended at $15.62, an increase of 66 cents in the regular trading session.

The investors around the world look at Berkshire's move as a bet for energy sector. Nonetheless, the shareholders of Kinder Morgan view this investment strategy as a boon to increase the company's balance sheet that suffers amid the fall in energy prices.

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