Kinder Morgan Inc stock get boost as Warren Buffet takes stake

Warren Buffett’s Berkshire Hathaway Inc. added an investment in Kinder Morgan Inc. during the fourth quarter, snapping up shares from the pipeline operator since it’s market price plunged.

Shares in Kinder Morgan were up almost 10 % at US$17.16 in trading Wednesday.

Berkshire held 26.5 million shares of the company as of Dec. 31, based on 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 this past year amid a slump in energy prices. The organization, which hauls oil and gas through a pipeline network long enough to circle the world 3 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 likely to last for quite a long time,” he said. And also 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 save cash amid tumbling prices in oversupplied commodity markets. When Kinder Morgan cut its dividend, it pledged not to issue any new shares with the end of 2018.

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Shares Jump

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 accountable for the investment. Both have been building portfolios at Berkshire and have a tendency to create 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, however it doesn’t smell of a straight-up Buffett proceed 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 gas and oil producer, and Cheniere Energy Inc.

Another opportunity Buffett, 85, has seen recently is Houston-based Phillips 66. Berkshire disclosed in August that it held a lot more than 10 % from the oil refiner’s stock and it 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 worth $1.6 billion at the end of 2015. Weschler and Combs were among the largest investors in DirecTV, which was purchased by AT&T last year.

Berkshire designed a small accessory for its Wells Fargo & Co. holding and sold its remaining 1.98 million shares in Chicago Bridge & Iron Co. When the largest investorin the engineering- and-construction firm, Berkshire began paring the stake this past year.
Bloomberg.com