- Berkshire Hathaway sold out of its stakes in Exxon Mobil and ConocoPhillips.
- And added more shares of Suncor Energy.
- Reason 1: US dollar to the Canadian dollar is at decade’s low.
- Reason 2: The Canadian Dollar is correlated to the oil price.
- Reason 3: Suncor Energy is a quality company priced at a value.
Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reported its Q4 2014 moves. It sold out of its stakes in Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP). However, it added mores shares of Suncor Energy (NYSE:SU).
Some Reasons Why Mr. Buffett sold some US big oil companies but bought Suncor Energy
Reason 1: US dollar to 1 Canadian dollar is at Decade’s Low
It currently takes ~$0.80 USD to exchange for ~$1 CAD, which is at the decade’s low. That means, around this exchange rate, Berkshire Hathaway would have bought the Suncor Energy shares at a 20% discount based on the foreign exchange rate alone.
Reason 2: Canadian dollar is Correlated to the Oil Price
The oil price’s lowest points were in 2009 and the present day, which matches the low points of the Canadian dollar compared to the US dollar historically. So, there’s a correlation between the oil price and the Canadian dollar. Low oil price implies low Canadian dollar in comparison to the US dollar, and vice versa. If one believes, oil price will head higher again, then one should also believe the Canadian dollar will head higher again.
Read the full article with comprehensive charts at Seeking Alpha: Why Warren Buffett Sold Exxon Mobil And Bought Suncor Energy.
As a Canadian, it’s difficult to pull the trigger to buy US stocks right now because it will cost an extra 20% to buy due to the foreign exchange rate. In the long-term, I expect this foreign exchange situation to be smoothed out, just like the ups and downs of the stock market. However, in the meantime, I think it makes sense for the Canadian to build some cash, or buy Canadian assets, if not sell some US equities for gains. That said, if there are compelling high quality US companies which are either super undervalued or have high growth, then, they can also be considered depending your own investing experience, portfolio situation,and risk tolerance.
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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