Warren Buffett bets on natural gas as a long term investment value play.
In a deal valued at $9.7 billion Dominion Energy announced, July 5 that it has executed a definitive agreement to sell substantially all of its Gas Transmission & Storage segment assets to an affiliate of Berkshire Hathaway.
Warren Buffett needs no introduction, in a few words, the billionaire investor has reached the top of the game amassing a fortune with a real-time net worth of $72 billion, as of July 20.
Warren Buffett’s focus on the fundamentals and value investing style has been studied by aspiring investors around the world.
“the billionaire investor has reached the top of the game amassing a fortune with a real-time net worth of $72 billion”
Warren Buffett bets on natural gas is in lockstep with his investment strategy which can be summed up in his saying, “Be fearful when others are greedy and greedy when others are fearful”
Warren Buffett’s Berkshire Hathaway multi-billion dollar investment in the natural Gas business goes against a trend to disinvest in non-renewable energies with environmental and safety issues. Warren Buffett’s Berkshire Hathaway will acquire in the deal over 7,700 miles of natural gas transmission lines, 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, and 25 percent in the Cove Point LNG export, import, and storage facility in Maryland.
Commenting on the sale of Dominion’s Gas Transmission & Storage segment assets to Warren Buffett’s Berkshire Hathaway Dominion’s Energy chairman, president, and chief executive officer, said: “Today’s announcement further reflects Dominion Energy’s focus on its premier state-regulated, sustainability-focused utilities that operate in some of the most attractive regions in the country.” Dominion’s Energy chairman added, “over the next 15 years we plan to invest up to $55 billion in emissions reduction technologies including zero-carbon generation and energy storage, gas distribution line replacement, and renewable natural gas. Also, between 2018 and 2025 we expect to retire more than four gigawatts of coal- and oil-fired electric generation”.
“over the next 15 years we plan to invest up to $55 billion in emissions reduction technologies”
DOMINION GAS – CEO
Capital flows into renewable, low carbon fuels are likely to be buoyant going forward, meanwhile Warren Buffett bets on natural gas
Warren Buffett is doing what he does best buying value assets at a bargain for the long term.
Warren Buffett bets on natural gas is a contrarian play as companies and investors disinvest in energies with high levels of greenhouse gas emissions
The consensus is that governments will pass regulations penalizing energies that have environmental issues and favor the so-called environmentally friendly renewable energies.
So perhaps Warren Buffett’s Berkshire Hathaway is yet again out of tune with the contemporary trends, the push for sustainable energy, and investing with a mindset of the previous century.
“the world’s richest investor doesn’t accumulate wealth by being wrong all the time” – The Wealth Training Company
In other words, could Warren Buffett bets on natural gas be “another we blew it” moment?
Warren Buffett considered investing in Google but decided against it, meaning Berkshire Hathaway shareholders haven’t seen a dollar from the tech titan’s impressive rise to a $1 trillion market capitalization.
‘We blew it’, Warren Buffett admitted he messed up by not investing in Google.
But the market has not been forgiving, despite the billionaire investor’s admission of missing technology investment opportunities. Buffett’s Berkshire Hathaway has lost more market capitalization in 2020 than all but 4 publicly traded U.S. companies
JPMorgan, Wells Fargo, Bank of America, and Exxon Mobil shares are the only companies that hit harder than Berkshire Hathaway.
But let’s be candid, the world’s richest investor doesn’t accumulate wealth by being wrong all the time, so perhaps there is more to Warren Buffett bets on natural gas than meets the eye.
A Machiavellian thought comes to mind.
Could the environmental push for greenhouse energies be the useful idiot movement which provides the well-heeled inside crowd with an opportunity to pick up cheap value energy assets on the dollar? Put another way, perhaps the investing herd is being wrong-footed and overly fearful about non-renewable energies and that could be why Warren Buffet is greedy on natural gas.
“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business” – Warren Buffett
Natural gas accounted for 38 percent of utility-scale electricity generation in the US
This could also be why Warren Buffett bets on natural gas. So natural gas is the most used energy for electricity generation, followed by coal 23 percent, nuclear with 20 percent, and renewables, including hydroelectric with 17 percent, according to EIA data.
Natural gas is expected to be the biggest source of power generation over the next few years as it continues to displace coal-fired electricity generation. Renewable energies like wind and solar are also expected to replace coal-fired electricity generation going forward.
Warren Buffett bets on natural gas underscore the fact that the billionaire investor thinks natural gas hasn’t run its course, despite what environmentalists and climate-conscious investors believe
“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business” Warren Buffett said in a statement. Warren Buffett’s Berkshire Hathaway Energy will own 18 percent of all interstate natural gas transmission in the US, which is an increase from 8 percent, according to CNBC.
But Warren Buffett’s Berkshire Hathaway’s shares are down more than 16% so far this year, while Tesla, at the top, has rallied almost 300%. Weighing on Berkshire Hathaway’s performance is Warren Buffett’s investment in banks, particularly JPMorgan Chase, Wells Fargo, and Bank of America in the wake of the 2020 pandemic. Banks and the financial sector has been the slowest sector to recover following the 2020 stock crash with the best performing being the technology-driven fang stocks.
Amazon, Apple, Microsoft, Google, and Telsa stocks have led the way in the V-shaped recovery in stocks during the second quarter of 2020.
Back in May, I reported that Warren Buffett turned bearish on stocks despite US stocks posting their best monthly gains since 1987.
I noted that typically the octogenarian billionaire investor is a stock bargain hunter in a selloff, but in late February’s stock rout Warren Buffett turned bearish.
But now it is revealed Warren Buffett bets on natural gas, using a portion of Berkshire Hathaway’s massive $122 billion cash pile to acquire a greater market share of the US natural gas market.