Berkshire Hathaway Inc. (NYSE: BRK-A) is closely watched because it is the company run by Warren Buffett. This makes any key holding of Buffett closely watched. Sometimes he gives hints and notes on why he is making share purchases in public companies, and sometimes he is very vague.
On Tuesday, Buffett gave some key clarifications on recent common stock purchases during a CNBC interview, regarding International Business Machines Corp. (NYSE: IBM) and Phillips 66 (NYSE: PSX). These were both very controversial holdings because the changes were not reflected in the latest holdings. 24/7 Wall St. wanted to go beyond Buffett’s actual statements and update the status of these two holdings, since we just covered the 20 most dominant Warren Buffett investments.
Buffett hinted yet again about getting to buy stocks cheaper on down days, but without being specific. 24/7 Wall St. recently noted which of the five stocks he likely has bought during the sell-off. Tuesday’s move cannot go without considering the $37 billion price tag for Precision Castparts Corp. (NYSE: PCP), due to what this does to his available cash. 24/7 Wall St. also identified what it was that made Precision Castparts so valuable to Buffett versus other buyers.
On IBM, Buffett said previously that he had acquired more shares. That was after the cut-off of the second quarter, and the second-quarterly filing of holdings did not reflect that more IBM shares had been bought. Buffet said he made a mistake when he alluded to buying more IBM — buying in the first quarter, and then buying more IBM shares in the third quarter, but not in the second. He even said that he thought Berkshire Hathaway had bought shares in the second quarter, but he was wrong.
On the recently disclosed Phillips 66 huge stake of $4.5 billion or so, Buffett said that Berkshire Hathaway was able to buy it on a tax-advantaged basis. He said that they bought as the price became right.
Buffett clarified that Berkshire Hathaway was not buying Phillips 66 as a refiner. He also clarified that this was buying because he likes the management team and likes where the company is placed. On whether Berkshire Hathaway would ever just acquire Phillips 66, Buffet said: “That would be a long stretch from here … we think they would be very happy to be independent.”
24/7 Wall St. noted recently what Buffett sees in Phillips 66 that the rest of us might not see. Another consideration on why Buffett would not likely acquire Phillips 66 outright: its market cap is $42 billion today. When you add in a premium, it is way above and beyond what would leave Buffett with a $20 billion cash cushion, when you consider the Precision Castparts acquisition tally of $37 billion.
As a reminder, Berkshire Hathaway’s prior stake in IBM was listed as roughly 79.5 million shares. That was worth $12.9 billion as of June 30, but the $146.00 price on Tuesday would generate a value of only $11.6 billion. As we do not know how many more shares of IBM Team Buffett have bought, we cannot speculate on the real value.
Select quotes from the Becky Quick interview of Buffett on CNBC are included on a second page, with verbatim Buffett comments. These pertain to IBM and Phillips 66 only.
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