If Buffett sold PetroChina stake, profit or Sudan may be why
October 11, 2007 (OMAHA, Neb.) — Legendary investor Warren Buffett’s company may have sold off the last of its shares of Chinese oil conglomerate PetroChina Co. (0857.HK), although Buffett’s followers will likely have to wait until his annual letter to know for sure.
Berkshire Hathaway Inc.’s sales of PetroChina stock, which were first reported in July, have activist investors speculating that Buffett may not want to be involved with a company with ties to Sudan.
But analysts who have followed Buffett longer believe profit is the most likely motive for the sales.
Berkshire reported Wednesday that it had cut its stake in PetroChina to 652.9 million shares, or about 3.1%, as of Sept. 30, according to a filing with the Securities and Exchange Commission. That’s down considerably from the 2.3 billion shares of PetroChina that Berkshire owned at the end of 2006.
Berkshire now owns less than 5% of PetroChina’s publicly traded shares and won’t be required to file additional updates on sales of the stock, so the rest of it could already be sold.
“It looks like he wants to wrap it up,” said Andy Kilpatrick, the stockbroker-author of “Of Permanent Value, the Story of Warren Buffett.”
Kilpatrick said he believes Buffett simply decided it was time to take a profit on the PetroChina investment and move on.
“It looks like he bought at the right time and sold at the right time,” Kilpatrick said.
Berkshire invested about $488 million in the PetroChina shares in 2003. Buffett estimated that investment was worth $3.3 billion at the end of 2006, when it traded for $140.78 a share.
This week PetroChina’s stock reached new heights for the company. It gained $5.69 Thursday to close at $193.28, and the stock gained another $4.21 in after-hours trading to sell for $197.49.
Before the sales began, Omaha, Neb.-based Berkshire was PetroChina’s second-largest shareholder, after the company’s unlisted state-owned parent, China National Petroleum Corp.
CNPC owns 88.2% of PetroChina, according to its 2006 annual report. And CNPC signed a 20-year oil deal with Sudan in June.
The United States and international humanitarian groups have accused the Sudanese government of using its oil wealth to wage genocide against the people in the western Darfur region, and some groups have suggested that PetroChina has supported the Sudanese government.
That’s why activists investors have pushed Buffett to cut ties with PetroChina, but he rejected those calls at Berkshire’s annual meeting in May.
Eric Cohen, chairman of the Investors Against Genocide group, said he’s glad Berkshire is selling its PetroChina stock, and he believes Buffett decided to sell because of PetroChina’s connection to Darfur.
Cohen said he hoped Buffett would make a public statement about the stock sale once Berkshire is done selling.
But Buffett and Berkshire’s board of directors defended the company’s investment in PetroChina at the meeting because they said PetroChina can’t tell China what to do. Berkshire’s written defense of its PetroChina investment remained up on its Web site Thursday.
“I see no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business,” Buffett said in May.
Berkshire spokeswoman Jackie Wilson said Thursday that no one was available for an interview, and the company rarely discusses its stock investments.
Berkshire owns insurance, clothing, furniture, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co. (KO), Anheuser-Busch Cos. (BUD) and Wells Fargo & Co. (WFC).
(AP)