Warren Buffett (Trades, Portfolio) continues to build his stake in Phillips 66 (PSX, Financial), reporting Monday his third purchase filing this month.
Buffett’s company Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) said it bought 1,645,887 shares of the company on Jan. 7, at prices ranging from $76.45 to $78.01 per share. This represents a 2.64% increase from the number of shares Buffett owned the day before.
The purchase also shows Buffett’s growing interest in the company. It follows a 107% increase to his holding in the third quarter, a total 0.08% increase Jan. 4 and Jan. 5, and 1.23% increase Jan. 6. His Phillips 66 holding now totals 63,940,380 shares.
Phillips 66's stock price has declined 3.61% year to date and gained almost 19% over the past year. After a roughly 0.6% gain since trading began Tuesday, the stock trades for $76.67 per share.
A spin-off from ConocoPhillips (COP, Financial), Phillips 66 is a midstream energy company that operates chemicals, oil refining and market businesses. Oil refiners tend to benefit when oil prices drop, and the price per barrel fell to a 12-year low near $30 Tuesday. Buffett, however, has said the refinery business was not the primary appeal for him.
“We’re buying it because we like the company and we like the management very much,” he told CNBC last September.
Buffett’s growing ownership of Phillips raises the question of whether he will purchase the entire company. Berkshire’s balance sheet contained $90.8 billion in cash at the end of the third quarter, enough to absorb Phillips 66's $40.2 billion market cap. But Buffett still owes approximately $37.2 billion for his deal to acquire Precision Castparts (PCP, Financial), which is expected to close in the first quarter this year and which would leave him with around $53.6 billion.
Buffett has also said he generally avoids letting his cash stockpile fall below $20 billion. Excluding the 12% of the company he already owns, it would cost Buffett around $35.4 billion to acquire the rest of Phillips 66 by market cap. The transaction would leave him with $18.2 billion in cash, meaning unless he paid with a combination of shares and cash or added more cash to his business in the fourth quarter, such a massive acquisition might place him too close to his spending limit to make a deal at the present time.
Ideas of an outright acquisition were snuffed out by Buffett, however, in the CNBC interview, unless the board has a change of heart. “That would be a long stretch from here,” he said. “And we would only do something in any company if the company wanted us to, and I think they’re very happy to be independent.”
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