Berkshire regulatory filing reveals stake in Suncor
17 August 2013
Legendary investor Warren Buffett has taken a stake in Suncor Energy Inc, in a move that can be said to betoken the potential of Canada's resource sector.
The head of Berkshire Hathaway Inc revealed in a US regulatory filing that he has accumulated a stake of 17.8-million shares in Canada's biggest oil and gas producer. At the current share price his investment is worth $620-million.
The Oracle of Omaha, has never invested in a Canadian corporation before, according to most investors. Barry Schwartz, a vice-president at Baskin Financial Services, said the investment was definitely his largest stake ever in a Canadian company.
The investing guru had first dropped hints of his interest in the Canadian energy sector five years ago, when he along with fellow tycoon Bill Gates paid a stealth visit to Canadian Natural Resources Ltd's Horizon project near Fort McMurray, Alberta.
According to commentators, Suncor held natural appeal for those looking to pick up energy stocks on the cheap, given that it was cheaper than most of its peers in terms of its share price to cash flow and book value.
The company' stock had seen 40 per cent of its value knocked off over the two years leading up to April, hit by pipeline capacity shortage, a glut of newly discovered shale oil in US and a substantial discount on Alberta crude as against the US benchmark.
The billionaire's preference for picking up stock in businesses rather than bonds helped Berkshire ride comfortably over interest rate bumps this year.
Omaha, Nebraska-based Berkshire's equity portfolio, which was around three times larger than its fixed-income holdings, overtook the $100 billion mark in the second quarter.
According to David Kass, a professor at the University of Maryland's Robert H Smith School of Business, Buffet's allocation to stocks had not only been the right strategy until now, it was very likely to be the right strategy going forward as well.
Canadian oil companies, including Suncor, had gained with the gap between oil-sands crude grade Western Canada Select and US benchmark West Texas Intermediate narrowing from a record $42.50 a barrel in December. Also, producers were increasingly taking the rail route to the market to beat the pipelines shortage.
Suncor was up 2 per cent at C$34.48 in the morning in Toronto. The oil producer has seen its stock advance 5.4 per cent so far this year.