Will Buffett continue to acquire oil in 222

Warren Buffett's Berkshire Hathaway Company won the approval of the US energy regulator to buy as many as 5% of the shares of western oil companies, which has widely triggered speculation in the market that Buffett may eventually acquire the whole western oil. So today Xiaobian is here to sort out Buffett's relevant knowledge, let's take a look!

will Buffett continue the merger?

in fact, western oil is not the only oil and gas enterprise that Buffett likes.

The flag figure of value investment has also increased his holdings in Chevron, another larger oil and gas production giant. As of the end of June, Berkshire * * * owned its shares with a market value of about $23.7 billion.

Many overseas institutional investors and finance professors are optimistic that Buffett will increase his holdings of western oil, and eventually achieve the goal of holding or even acquiring the whole. They predicted that the relationship between Berkshire and Western Petroleum may eventually evolve into a "slow-paced acquisition", and Berkshire will continue to increase its holdings to the amount allowed by the regulatory authorities and gradually acquire it completely.

On this issue, I have summarized a lot of information in the current market and summarized the following points:

First, Buffett's love for "traditional industries" is traditional. For example, during 29-21, he bought Burlington North Santa Fe Railway Company as a whole by gradually buying a large number of shares.

second, from a fundamental point of view, western oil companies have drastically cut their expenses this year, and actively repaid their debts, thus improving their ability to generate cash. In the second quarter, it recorded a record free cash flow of $4.35 billion and a profit of about $3.7 billion, which may make the company a company with a good "moat" in Buffett's eyes. At the same time, for Warren, if he can acquire this enterprise with high free cash flow, it will also be a good cash shield for many other businesses of Berkshire.

Third, in terms of industry, the oil and gas industry is not necessarily the "sunset industry" that people think. Buffett has always been a defender of long-termism, and his active shareholding largely represents a long-term optimism for the whole industry. I will explain this in detail below.

fourth, compared with pure financial investment, it may be more beneficial for Buffett to fully control western oil. First, once the western oil is completely merged into the Berkshire system, it means that this enterprise will get a lot of real resources, especially low-cost financing channels, which will slow down its risk of large fluctuations in the oil and gas market and create a virtuous circle; Second, Berkshire still holds a lot of cash. According to public information, even after a net purchase of $45.2 billion in shares in the first half of this year, Berkshire still has $15.4 billion in cash and equivalents at the end of June, which is fully capable of putting the money in a "better place" that the stock god thinks.

In this way, whether from Buffett's traditional investment philosophy or from the actual benefits, it is likely that the acquisition of western oil is the next goal of Warren Buffett.

is investing in oil and gas enterprises a practice of its long-term?

As we all know, Buffett is a long-term activist. For institutional investors like Buffett, long-termism is the embodiment of a pattern and a philosophy different from narrow zero-sum game speculation. It is optimistic about the continuous creation of value, innovation and sustainable development of the invested enterprises.

Buffett has a classic saying: "If you don't want to own a stock for ten years, don't even consider owning it for ten minutes."

judging from the history of his investment, Buffett never makes investment decisions because the price of the stocks he invests in will rise or fall in a week, a month or even a year, but often because he wants to own the shares of these enterprises for a long time.

Of course, throughout his investment history, he still sells some stocks from time to time for various reasons, but on the whole, by reading his public speeches at shareholders' meetings over the years, he consistently treats every investment decision with the mentality of owning the stocks he has invested in for a long time.

Buffett has said in public on more than one occasion that for those wage earners who can't "hold" an investment target forever, take their savings to buy a low-cost index fund (similar to the S&P 5 index), and then forget about it and continue to work hard, then in the long run, the stock index fund will achieve a better return on investment.

So, do western oil companies conform to Buffett's long-term philosophy? Lao Xing, next door, certainly can't judge what Buffett thinks, but from the analysis of the oil and gas industry and the fundamentals of western oil, maybe we can find the reason for being optimistic about this enterprise for a long time.

firstly, according to the published data of western petroleum, when the oil price hovers at $4 per barrel, it can already generate profits. According to Wind's data, the average price of Brent crude oil in the second quarter of this year was $114.1 per barrel, while the average price of American crude oil in the second quarter was $19.9 per barrel.

Buffett is likely to be optimistic that oil prices will remain high for a long time. Of course, how will the prices of oil and natural gas go in the long run? The specific logic and analysis in this is beyond my ability circle. Here, I'm just making bold assumptions.

Secondly, according to the public documents of Western Petroleum, the company's goal is to achieve zero emissions of its operation and energy use by 24. The company has invested in decarbonization industry through its subsidiary, and plans to spend up to 1 billion US dollars, and is building the first factory with industrial production scale to capture carbon dioxide from the air. The project named "Direct Air Capture (DAC) Factory" may also help it enjoy the tax benefits brought by the latest US Inflation Reduction Act. This is the ability that many traditional American oil and gas companies do not have.

from this, perhaps we can infer that Buffett may also see an opportunity in the process of switching between clean energy and traditional energy through western oil. Under the general trend of sustainable development and renewable energy transformation in the world, western petroleum, as a traditional energy giant, seems to have the potential to become a "model student" of energy transformation in the long run.

Enlightenment to Public Offering of Fund investors

In fact, according to the works of some well-known fund managers I read and the communication with some managers in Public Offering of Fund, I found that many managers in Public Offering of Fund regard Buffett's long-term investment concept as the logical basis for their usual decisions and even for their behavior.

A well-known fund manager wrote in his book: Environment, fluctuation and cycle can make people fall into negativity and pessimism from time to time. At this time, it takes great strength to pull people out of negativity and pessimism, instead of being more confused. Long-term perspective and time is this great power.

For these fund managers who claim to pay attention to "long-term", have they put their faith in long-term value investment into practice? In fact, it is difficult to be revealed, and we cannot participate in the research and decision-making meetings of these fund managers and teams.

However, there is a simple method that may help us to judge whether these fund managers can be labeled as long-term. That is to look at the performance of these fund managers for three years, five years or even longer.

Of course, this is a bit simplistic. Fund managers with good long-term performance may not all approve of long-term or value investment. On the other hand, if fund managers who have publicly expressed their long-term beliefs can't achieve long-term good performance, what they are talking about can only be "an armchair strategist".

Because it is very simple, the data will not deceive people, and the medium and long-term results can best reflect the stability and continuity of these fund managers' abilities. Only by prolonging the time can we see the real logic and energy level of a fund and the real principle and ability circle of a fund manager.