Why Did Warren Buffet Invest In Exxon Mobil Corporation (NYSE:XOM)?

Posted by Peter Lauro November 17, 2013 0 Comment 3700 views


The world’s biggest oil company by market value, Exxon Mobil Corporation (NYSE:XOM) is potentially ignored by the market and is certainly undervalued, believes Warren Buffett. May be that is the reason why Buffett is investing in the company since 2011. In the most recent update, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A), a holding company, reported a $3.7 billion stake in in Exxon Mobil (NYSE:XOM). The holding company owned approximately 40.1 million shares of Exxon Mobil Corporation (NYSE:XOM) as on September 30, 2013; as per the recent regulatory filing.

This is notably Berkshire Hathaway’s largest new holding since it invested $10 billion in International Business Machines Corp. (NYSE: IBM) in 2011.

To limit the copy-cat investing, the U.S. Securities and Exchange Commission agreed to Berkshire Hathaway Inc. (NYSE:BRK.A)’s request for confidential treatment and hence about three quarters of holding in Exxon was added in quarter ended June 30, 2013.

The Exxon Potential

Exxon Mobil Corporation (NYSE:XOM) recently boosted oil and gas production by 1.5% during 3Q13 against the continued output declines going on for past couple of years. The company is regarded among the most efficient explorers in the international market. According to data compiled by Bloomberg, Exxon Mobil spent $19.27 to find the equivalent of a barrel of crude in the prior year. This was certainly cost efficient when compared with $21.48 per-barrel cost incurred by Chevron Corporation (NYSE:CVX) and $22.66 by BP plc (ADR) (NYSE:BP).

Warren Buffett’s Perspective

As known to many, Warren Buffett usually invests in businesses having genuine staying power as he believes in the quality of permanence with multi-generational time horizon. Back in 2011, Buffett mentioned in his shareholder letter that Exxon Mobil Corporation (NYSE:XOM) will hold assets worth many more trillions over a century from now and might also deliver dividends worth trillions of dollars to its investors.



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