National Post (National Edition)
Buffett sells Suncor stake
CALGARY • When legendary investor Warren Buffett first revealed holdings in
Suncor Energy Inc. in 2013, shares in the oilsands major jumped.
On Tuesday, they jumped again — a day after Buffett’s regulatory filings showed he had sold his remaining 22 million shares in the company. But the latest stock movement was more a result of a collective surge in energy shares as oil prices surged the most in seven months. Berkshire Hathaway, Buffett’s company, has been reducing its holdings in Suncor throughout the year – and selling other holdings in the energy sector over the course of the third quarter, while opting to build up large positions in U.S. airline companies, a sector he once shunned.
Berkshire owned 30 million Suncor shares at the beginning of the year before selling eight million shares in the second quarter and then liquidating its remaining position in the third quarter.
Suncor shares traded between $34.06 and $37.23 during the third quarter, which is a roughly 17 per cent premium over the company’s share price range when Buffett first started building up his stake in the oilsands producer in the second quarter of 2013.
Buffett owned Suncor when the company was aggressively growing its production through acquisitions, including the purchase of Canadian Oil Sands Ltd., the acquisition of Murphy Oil Corp.’s stake in Syncrude Canada Ltd. and other smaller deals.
Suncor president and CEO Steve Williams said during the company’s third-quarter earnings call that the window of opportunity for more acquisitions was closing, and the company would instead focus its capital on potential dividend hikes and share buybacks.
While Berkshire has been selling shares in Suncor, data compiled by Bloomberg shows San Francisco-based investment management firm Dodge & Cox bought 20 million shares in the energy company, and Capital Group Companies Inc. has recently purchased 12.7 million shares.
More than two-thirds of analysts surveyed by Bloomberg have a “buy” rating on Suncor’s shares, with an average 12-month target price of $45.45.
Suncor shares added almost four per cent Tuesday, closing up $1.56 to $41.34 in Toronto trading. The TSX energy group climbed 3.4 per cent as oil prices bounced back from multimonth lows on expectations that OPEC will agree this month to cut production to reduce a persistent glut.
In addition to selling its Suncor shares, Buffett’s company also trimmed its position in pipeline giant Kinder Morgan Inc., but retained an interest in Houston-based oil refiner and gasoline retailer Phillips 66.
Berkshire’s portfolio shifted instead toward airline stocks — a surprising move given Buffett had called airlines a “death trap for investors” as recently as 2013, when he was beginning to build up his stake in Suncor.
Berkshire purchased 21.8 million shares of American Airlines Group Inc., worth US$800 million by the end of the third quarter. It also bought 6.33 million shares in Delta Air Lines Inc., 4.53 million shares of United Continental Holdings Inc., and CNBC reported that Berkshire added a position in Southwest Airlines Co. after Sept. 30.
The company’s purchases in the airline industry follow a year of record profitability in 2015.
Consolidation and falling jet-fuel prices pushed earnings at the six biggest U.S. airlines to a record US$18.4 billion in 2015, the industry’s fourth straight year of profitability following a decade in which combined losses climbed to US$53 billion.
United CEO Oscar Munoz, speaking Tuesday to investors and analysts in Chicago, called Berkshire “the anchor tenant,” and said its share purchase reflected faith in United and the overall industry.
BUFFETT HAD CALLED AIRLINES A ‘DEATH TRAP’ (IN 2013).