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Buffett’s Cashing Out Of Oil For $3.7 Billion
Aspire, Thought Leaders | 10 March 2015
By: Vance Wong
Articles (74) Profile

Billionaire investing extraordinaire, Warren Buffett appeared on CNBC earlier last week on Monday after the release of his Berkshire letter. Buffett revealed that his company had recently let go of all of their Exxon Mobil shares, giving Berkshire Hathaway a surge of liquidity of approximately $3.7 billion.

Exxon Is Still Great

Berkshire first had a holding of 41.1 million shares in Exxon back in 2013 when the stocks cost an average of $90.86. When Buffett decided to sell their entire holdings in September 2014, Exxon was priced at about $93.27 per share. The sales generated about $3.7 billion in liquidity for Berkshire.

Despite Berkshire’s move, Buffett still thinks that Exxon is a “wonderful company.” However, it was obvious that the entire oil industry had been hit by dipping oil prices for the past year. Buffett also commented that company “might have other uses for the money,” hinting at possible acquisitions, which is clear in his recent entrance into the European market.

IBM over Exxon?

Shortly after Berkshire’s sales of its Exxon holding, there were reports that the former increased its stake in International Business Machine (IBM). Berkshire now has 77 million shares, 9.2 percent more than before and maintains its position as the biggest holder in the computer company. This surprised many because IBM has not been doing very well recently.

Buffett explained his company’s decision with IBM’s steady price on the market right now, which provides some convenience if they want to sell it any time. IBM released its forecast for 2015 earlier in January this year, predicting an increase in operating earnings per share. However, it is not clear if Buffett thinks that IBM will perform better this year.

For retail investors who are highly influenced by Buffett, it might be a fairly good move to sell any Exxon shares that you currently hold. While it is not very risky to keep your holding because Exxon is still making money, the slumping oil prices do not seem to be hiking back up any time soon. Is IBM really a good company to invest right now? At least the Berkshire legend thinks so.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

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