Already having a major stake in the transportation industry with Burlington Northern Santa Fe, Warren Buffett’s firm is now making a move into another type of transportation investment.
Berkshire Hathaway is acquiring Phillips Specialty Products Inc., the flow improver business of Phillips 66, in exchange for Phillips stock Berkshire already owns, MarketWatch reports. Phillips Specialty Products makes polymers designed to reduce drag and increase flow potential in pipelines, MarketWatch said. The deal is expected to close sometime in the first half of 2014.
The move is a logical step for Berkshire, says MarketWatch’s Jim Jelter. Burlington Northern transports oil via rail from the blossoming Bakken oil field in North Dakota, where the use of fracking is growing. “Because it’s new, there are few pipelines serving the region, which means about 90% of the state’s crude is being sent to refiners by rail,” Jelter says. But, he adds, pipelines are much safer and more efficient when it comes to transporting oil and gas.
Validea’s Buffett-inspired portfolio is up 125% since its 2003 inception vs. 74% for the S&P 500.
“At the same time, Berkshire’s PSPI acquisition neatly fits Buffett’s move into a broad spectrum of energy companies over the past few years, including the 27-million-share stake he took in Phillips 66 earlier this year,” Jelter says. “The next logical step for Buffett’s empire building in the energy sector would appear to be investing in pipelines and, at the other end, the refineries that stand to benefit most from them.”
Comments are closed.