Warren Buffett piles into stocks when most others sell. This investment philosophy that made him the world’s most famous investor has been at play ever since the markets started tumbling last month. All others ran for cover, while Buffett sensed opportunity.
Wednesday revealed yet another instance of Warren Buffett being a net buyer in this market. His Berkshire Hathaway raised its stake in Phillips 66 by 6 percent to 61.5 million shares. Those additional 3.5 million shares are worth approximately $282 million at yesterday’s closing price of $80.65.
Phillips 66 and IBM
Close to two-thirds of those shares were acquired on Tuesday when the stock fell to $77 per share. After the most recent accumulation, Berkshire’s stake in Phillips 66 is now valued at about $4.98 billion. Berkshire has been secretly buying into Phillips 66 since the second quarter, an SEC filing from the holding firm showed on August 28.
Despite the broader energy sector slide, Phillips 66 has soared 10.6 percent year-to-date. The reasons behind this strong out-performance are not hard to find. Unlike other oil companies, Phillips 66 has actually benefited from falling crude prices. Gasoline has managed to hold strong against oil, and as the spread between the two increased, the refiner’s margins rose as well.
Warren Buffett also added to his firm’s holdings in International Business Machines Corp. . He first disclosed a stake in late 2011. Even though the stock has consistently disappointed, Buffett continued to buy its shares, with the most recent acquisitions being in August.
Warren Buffett Cautions Fed
Warren Buffett is confident stock prices will eventually move higher. “If we’re thinking about where they’re going to be in five or ten years, I’m confident they will be considerably higher,” he said on CNBC.
He however was candid enough to admit he had “no idea” where the markets were heading in the short term because “I’ve never been any good at it”.
On the economy, Buffett said the 2 percent growth is “not a bad rate, but it’s not a booming rate, either.” He expects the Federal Reserve to eventually start raising interest rates, but cautioned against an aggressive stance.
“If our rates got substantially higher than Europe’s, I don’t think that would be good for exports in this country. In economics, you can never do one thing. There is always a ‘then what’ and I think the ‘then what’ of raising rates while Europe’s trying to keep them low could have some consequences down the line,” Warren Buffett said.
Wall Street is focused on when the Fed will raise rates for the first time in over nine years. Markets are pricing in about a 28 percent chance of an interest rate hike on September 17.