Warren Buffett's Berkshire Hathaway Inc. increased holdings in oil producer ConocoPhillips and took a stake in manufacturer Eaton Corp. in the third quarter, expanding the firm's portfolio as markets tumbled.
Berkshire had more than 83 million shares in Houston-based ConocoPhillips as of Sept. 30, compared with about 17.5 million on March 31, the company said today in a regulatory filing. Buffett also disclosed a reduced holding in Bank of America Corp. and more shares of NRG Energy Inc., the second-biggest power producer in Texas. The Standard & Poor's 500 Index dropped 8.9 percent in the three months ended Sept. 30.
Berkshire, which purchased MidAmerican Energy Holdings in 2000 and reported record profits last year from selling holdings of PetroChina Co., is betting on a long-term increase in energy demand worldwide. Global oil consumption will average 85.89 million barrels a day this year, up 80,000 barrels from 2007, according to a U.S. Energy Department report this week.
``Buffett is thinking decades ahead,'' said Jeff Matthews, author of ``Pilgrimage to Warren Buffett's Omaha'' and founder of Greenwich, Connecticut-based hedge fund Ram Partners LP. ``He's thinking about oil production falling and an eventual doubling of worldwide demand as countries like China reach U.S. levels.''
ConocoPhillips traded as low as $67.31 a share in the third quarter after closing 2007 at $88.30. The company dropped 3.6 percent today to $47.39 in New York Stock Exchange composite trading before Berkshire's filing.
Waiting for Spring
Buffett, the world's preeminent stock picker, has said he's also spending his own money to buy U.S. stocks as prices decline amid the worst financial crisis in 75 years, switching his holdings from government bonds. Berkshire, where Buffett is chief executive officer and head of investing, spent about $3.94 billion on stocks in the quarter and sold shares for about $300 million, according to separate filings.
``Most major companies will be setting new profit records 5, 10 and 20 years from now,'' Buffett said in a column in the New York Times in October. ``If you wait for the robins, spring will be over.''
Berkshire held about 59.7 million ConocoPhillips shares as of June 30, Buffett revealed in a filing. Buffett, 78, won permission from regulators to keep that number confidential until today to prevent copycat investing. Buffett's company is now the largest shareholder in ConocoPhillips.
Looking for Stability
``Energy is an industry that has the stability that he's looking for,'' said Michael Yoshikami, the president of YCMNet Advisors in Walnut Creek, California, which manages $850 million, including Berkshire shares. ``Conoco is a huge refiner, and while refiners are certainly under some pressure, they are essentially a service-for-fee business, so they are a classic kind of stable, core business for his portfolio.''
Bill Tanner, a spokesman for ConocoPhillips, had no immediate comment.
Berkshire is also the largest shareholder of companies including Coca-Cola Co. and American Express Co. as of Sept. 30, with a portfolio worth $76 billion. Berkshire has been increasing investments in the past year in banks, including U.S. Bancorp and drugmakers such as France's Sanofi-Aventis SA.
Buffett, named America's richest man by Forbes magazine, built Berkshire from a failing textile manufacturer into a $155 billion holding company by investing premiums from insurance subsidiaries such as Geico Corp. in out-of-favor securities and buying businesses whose management he deemed superior.
`Inner Workings'
Known as the ``Oracle of Omaha,'' Buffett has become a cult figure among investors, drawing 31,000 people to an Omaha arena for his annual shareholders meeting this year.
Mutual funds and individual investors mimic his stock picks in an effort to duplicate his success, and an academic study in 2007 found that using this strategy for 31 years would have delivered annualized returns of about 25 percent, double the return of the S&P 500.
``Once every three months we get a glimpse into the inner workings of the mind of the greatest investor in the history of mankind,'' said Mohnish Pabrai, founder of Irvine, California- based Pabrai Investment Funds, who holds Berkshire shares. ``Equities are the cheapest we've seen them in a very long time.''
Buffett discloses other holdings in filings with non-U.S. regulators.
Goldman Sachs
Buffett is finding other opportunities amid the economic turmoil, funding buyouts, buying preferred shares and acquiring whole companies. In the past two months, he agreed to spend $5 billion of Berkshire's cash for a stake in Goldman Sachs Group Inc., betting the Wall Street firm would be among the survivors of a worldwide credit crisis, and another $5 billion in preferred shares of General Electric Co.
He also agreed in July to lend $3 billion to Dow Chemical Co. to help fund that firm's takeover of Rohm & Haas Co., and committed $6.5 billion in April to help Mars Inc. buy chewing gum maker Wm. Wrigley Jr. Co. Berkshire's MidAmerican Energy Holdings Co. struck a deal in September to pay $4.7 billion for Constellation Energy Group Inc.
``When there are market dislocations we're always going to take advantage of them,'' Buffett told reporters at Berkshire's annual shareholder meeting in May. Deals and investments reduced Berkshire's cash holdings to $33.4 billion on Sept. 30 from $47.1 billion a year earlier, according to a regulatory filing last week.
Berkshire shares, which rose in 17 of the last 20 years, are down about 29 percent since Dec. 31. The firm has reported profit declines for four straight quarters, the longest streak in more than a decade, as insurance results worsened.
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