There is an unmistakable trend in stock trading in ConocoPhillips the last few days. It starts out strong early, as value investors hungrily buy up shares. Then, over the course of the day, it fades away, either finishing down or little changed. Trading volume has been above the 13 week average nearly every day for the last two weeks. COP is a highly rated company, and oil was up 10% this week. Today ExxonMobil rallied nearly 3%, but COP was marginally down. What’s going on?
When COP hit $40 a share I gave it a thumbs-up, so I am naturally surprised at the short term performance. COP now trades right around its book value, even after its huge $34 billion writeoff in the 4th quarter. The forward P/E is 5.6 (Exxon’s forward PE is 9.5, Chevron’s is 7.5). That’s a noticeable difference, even if the cost to produce oil is higher at COP.
There are two possible reasons for this: either there is another bombshell looming at COP, or there is a forced seller out there.
Enter Warren Buffett. He has already admitted costing his company billions by quadrupling his stake in COP while oil was at the peak. Berkshire statements confirm he has been selling some of his stake in the company.
I think he is still selling. The question is why. In all probability he is still raising more cash to cover other potential losses. If I'm right, this is a chance to take advantage of the most famous investor in the world because he is a forced seller.Related Links
Berkshire Hathaway Annual Letter to Shareholders 2008 - Read the latest Berkshire Letter
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