Warren Buffett (Trades, Portfolio) has continued to increase some of his newer stakes, revealing that he bought shares of Phillips 66 (PSX, Financial) on Aug. 25 that boosted that holding 6.06%.
Buffett purchased 3,511,470 shares in total, according to a filing dated Sept. 9 and reported on GuruFocus Real Time Picks. The shares cost around $247.7 million based on the purchase date closing price of $70.55. They also brought Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial)'s total holding to 61,486,926 shares, worth about $5 billion at Thurday afternoon’s trading price of $81.12 per share.
On CNBC a day before the announcement that he bought more shares, Buffett said his primary reasons for buying the company – which did not include the low price of oil.
“We’re not buying it as a refiner. We’re certainly not buying it as an integrated oil company,” he said. “We’re buying it because we like the company. And we like the management very much.”
“Ever since Greg Garmin has taken that over after is spun out of ConocoPhillips (COP, Financial) he’s done a terrific job. So, I like the company.”
Buffett also used a temporary price dip as an opportunity to buy the shares. Up 13% year to date, Phillips 66 shares had dropped 16% from their peak in August to the date that Buffett bought – their lowest point since February – as oil prices reached a multi-year low.
Phillips 66 announced its second-quarter financial results July 31, with $1.01 billion in earnings, increased from $863 million in the same quarter the previous year, and revenue of $29.1 billion, decreased from $46.1 billion a year previously.
The company said it was focused on growing its “higher-valued” midstream and chemicals businesses and enhancing returns in its refining business. It also returned $600 million in dividends and shares repurchases during the quarter and has plans for several joint ventures with which commercial operations are set to commence in the fourth quarter of 2016.
Goldman Sachs commented on oil refiner companies in a research note on Aug. 24, during the sell-off. “Valuation risk/reward is improving after the sell-off, but with margins still near peak levels, we maintain our Neutral coverage view on the refining sector,” Goldman Sachs analysts Neil Mehta, Kristina Cibor and Sam Schwartz said in their note.
Phillips 66 shares have gained 3.44% in the past five trading sessions, to trade near a one-year high price. The company has a P/E ratio of 10.48 and P/B ratio of 1.97, as well as a P/S ratio near a five-year high at 0.33.
Also in the CNBC interview, Buffett verbally confirmed that he has purchased more IBM (IBM, Financial) shares in the third quarter, though no related filings have surfaced to date. He owned an 8.12% stake in that company, or roughly 79.6 million shares, at the end of the second quarter, as his third-largest U.S. portfolio holding.
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