- The Warren Buffett effect is sending Kinder Morgan (KMI +10.9%) soaring after Berkshire Hathaway (BRK.A, BRK.B) disclosed a new 26.5M-share purchase during Q4, even though that's not a major investment for Buffett - and the Oracle may not have made the purchase at all.
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Barron's Andrew Bary believes the purchase probably was taken by either Todd Combs or Ted Weschler rather than Buffett himself; Berkshire does not disclose which manager buys which stocks, but smaller holdings generally are initiated by Combs or Weschler, who each run ~$7B of the equity portfolio, while Buffett oversees more than $100B.
- Bary also notes that KMI emphasizes distributable cash flow, while Buffett prefers to focus on free cash flow - "something Kinder Morgan doesn’t have a lot of... [KMI] has sizable capital expenditures beyond just the 'sustaining' capital expenditures included in its DCF calculation. As a result, it is not left with much free cash flow."
- Even if Buffett did take the position, Bary says he has not had a good investment record in recent years, and Berkshire may have a loss in KMI if it bought its entire position in Q4, as it fell sharply when the company cut its dividend by 75% in December.