Why COP!?- Conoco Phillips

[Mandeep]

Now that we know why Buffett likes WFC and AXP, does anyone know why he likes COP?

 

I mean isn't XOM more conservative, has more cash, is the leader of the industry, etc?

 

Why did Buffett buy into COP? I have been trying to find articles on this and I just can't. I think he began adding in '06?

 

Let me know,

 

M

[ExpectedValue]

http://www.berkshirehathaway.com/letters/2008ltr.pdf

 

page 16

[Mandeep]

You mean this:

 

"I told you in an earlier part of this report that last year I made a major mistake of commission (and

maybe more; this one sticks out). Without urging from Charlie or anyone else, I bought a large amount of

ConocoPhillips stock when oil and gas prices were near their peak. I in no way anticipated the dramatic fall in

energy prices that occurred in the last half of the year. I still believe the odds are good that oil sells far higher in

the future than the current $40-$50 price. But so far I have been dead wrong. Even if prices should rise,

moreover, the terrible timing of my purchase has cost Berkshire several billion dollars."

 

This was on Page 15, don't see anything on 16.

 

That still doesn't really answer the question. I mean why Conoco? Why not Chevron, Exxon, etc.

What is special about Conoco?

[ExpectedValue]

This was on Page 15, don't see anything on 16.

 

That still doesn't really answer the question. I mean why Conoco? Why not Chevron, Exxon, etc.

What is special about Conoco?

 

You're actually incorrect about the page numbers. Go back and look.

 

I don't mean to be offensive, but in a lot of your posts, it kind of comes off as if you're asking to be spoon-fed information rather than doing the research yourself. I mean a simple google search of "Buffett Conoco" will yield results like this one: http://iamamazing.wordpress.com/2006/10/16/warren-buffett-brka-and-conocophillips-cop/ or this http://www.dailywealth.com/archive/2006/aug/2006_aug_25.asp which would have answered some of your questions.

[scorpioncapital]

 

 

That still doesn't really answer the question. I mean why Conoco? Why not Chevron, Exxon, etc.

What is special about Conoco?

 

But it answers the question precisely: He said he made a mistake.

[bookie71]

Probably he prefers for the quality of management - look at all the lawsuits against Exxon - some are for criminal type things. I don't know about the other companies.

[Mandeep]

TariqAli,

 

I DO take offense to your comment. By the way, your page number (orig response) was no help whatsoever. I don't care that he made a mistake. I wanted to know WHY he invested in the first place (i.e. back in '06- ie good management, good reserved, undervalued stock, etc). However, this article is right on the money: http://www.dailywealth.com/archive/2006/aug/2006_aug_25.asp

 

Spoon-fed? What is this forum for? I want to know why smart individuals like yourself think he invested in COP. Stop assuming stuff...

That's the reason I'm here.

 

If you think that I want to be "spoon-fed," feel free NOT to spoon feed me on my next post. Either way, I could care less.

Thanks anyway for the interesting article.

 

 

-M

[scorpioncapital]

"I wanted to know WHY he invested in the first place "

 

But he stated that too in the annual, he said he thought oil prices weren't going to go down from $140/barrel to $50/barrel.

[Mandeep]

See he started buying it long before '08.

But why not exxon, hess, chevron, there's a million ways to play oil. that's my question.

 

See AXP: "they have the cream of the cream credit card holders"

WFC over other banks: "they try to get their money cheaper and treat banking like retail"- like last article we saw.

[scorpioncapital]

He'll probably answer some of that next week at the AGM, I can only speculate, but the comparison with WFC and AXP is not the same. Those companies have an economic moat (at least in AXP's case). Banking is a commodity but has some network effects. Oil is a commodity therefore it is more valued on supply and demand as well as resources in the ground, nobody cares where they get their gas.

[Mandeep]

Ya. I agree with you 100%.

[Zorrofan]

Perhaps Buffett secretly is a belliever in peak oil!

 

;D

 

cheers

Zorro

[cayale]

Why?  My best guesses:

 

1. Thinks over time the price of oil will remain high enough to justify the purchase of shares in the 80s

2. Large proportion of reserves are domestic.

3. Price.  Was trading at a discount to the other big majors.

4. Management admits mistakes freely

5. Free call on oil sands projects

[T-bone1]

My understanding is that you get a lot more oil for each share of COP you buy. XOM has a lot of current earnings power, but has chosen to buy back stock rather than replace their reserves for years.

[basl1]

At last years meeting, both Charlie andWEB stated they felt in 20 years, the price will be hier.

COP has refining and production abilities that make them a better assett. They have sold their low priced distribution system

Barry Lycka

[mpauls]

To begin with, ConocoPhillips meets all of Berkshire's requirements.

 

Though he did say he made a mistake, what did was shot himself down before anyone else could criticize him.  More importantly, he did not say he regretted the purchase.  When attractive companies are available at attractive prices you buy them.  His only concession was that he had purchased when oil prices were high-not that his purchase price of COP was too high.

[Crip1]

My understanding is that you get a lot more oil for each share of COP you buy. XOM has a lot of current earnings power, but has chosen to buy back stock rather than replace their reserves for years.

 

T-Bone,

 

That was part of my thesis when I bought Suncor a couple of years back, that and they had a effective hedge on the Nat Gas required to extract the crude from the oil sands. I profited on Suncor but not NEARLY as much as I would have had I held out another 6 months or so.

 

Now, though this is a COP thread, I am looking again at Suncor...anyone else? I thought Mungerville was positive on it as well but that was a while ago when crude pricing was on a significnt increase.

 

-Crip

[nodnub]

T-Bone,

 

That was part of my thesis when I bought Suncor a couple of years back, that and they had a effective hedge on the Nat Gas required to extract the crude from the oil sands. I profited on Suncor but not NEARLY as much as I would have had I held out another 6 months or so.

 

Now, though this is a COP thread, I am looking again at Suncor...anyone else? I thought Mungerville was positive on it as well but that was a while ago when crude pricing was on a significnt increase.

 

-Crip

 

Hi Crip,

 

Do you know what the production cost per barrel is at Suncor these days?  Do you know how it compares to production costs at Canadian Oil Sands Trust? 

 

I have owned and followed Suncor in the past.  It was a fairly well managed company and costs were quite a bit lower than Syncrude at the time.