Buffett's PetroChina Sale May Signal Anxiety Over Chinese Bubble - WSJ

Includes: BRK.A, PTR
by: SA Eli Hoffmann

Analysts say it is likely Warren Buffett's company, Berkshire Hathaway, has already sold off its entire position in oil explorer and producer PetroChina, a move that has some Buffett followers speculating the investment giant may feel the Chinese market's recent upside explosion may be getting long in the tooth, the Wall Street Journal reports. "There are a lot of people paying attention to what he is doing and watching the trajectory of his move," says Andrew Foster, director of research at Matthews China Fund. "As investors, we're all wrestling with the fact that it's difficult to justify current valuations in China, even though there has been a lot of fundamental, macroeconomic progress there." This week Berkshire reported it has sold more than 70% of its original 11% stake in the company, which would today be worth $4.7 billion. "There is a lot of euphoria and blue sky in the valuations, with very little worry over downside risk," said Aberdeen's Devan Kaloo. "We've been taking some money off the table, and it looks like old Warren's been doing the same." Others, such as Templeton's Mark Mobius, says PetroChina is still a bargain at just 8x estimated five-year earnings. Buffett's divestiture may reflect ethical qualms with PetroChina's parent company's investments in Sudan, the profits of which are used to fund Khartoum killings, and not a distaste for the Chinese economy. Bulls say Beijing will eventually allow oil to move towards global prices, giving the company an even bigger earnings boost.

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