Midstream oil and gas pipeline MLPs have been just about the most despised asset class in recent memory. Yes they just got a major shot in the arm from two legendary investors, Warren Buffett and David Tepper.
Buffett’s Berkshire Hathway (BRK-A) just disclosed today that it accumulated 26.5 million shares at an average price of $23.72, putting his cost basis at just shy of $630 million. That’s a small 0.3% piece of Berkshire’s portfolio, but it does represent over 1% of Kinder Morgan’s (KMI) outstanding shares. And these numbers are as of year end. Buffett may very well have added to this position significantly in the six weeks that have followed. Shares have certainly gotten cheaper (they closed yesterday at $15.62).
Making a bigger splash, David Tepper’s Appaloosa Management disclosed making major new investments in both Kinder Morgan and Energy Transfer Partners (ETP). Tepper bought 9.5 million shares of Kinder Morgan at an average price of $23.72. about 2.8% of Tepper’s portfolio is now invested in KMI, making it his 10th largest individual stock holding.
He also scooped up 5.1 million shares of ETP at an average price of $39.15 (it traded at $27.27 as of close yesterday). ETP was Tepper’s 8th largest position as of year end, making up about 3.5% of his portfolio.
Does this guarantee the bottom is in? No, of course not. But it is definitely worth noting that two of the smartest men in finance both jumped into this hated asset class at much higher prices.
It’s bothered me for a long time that the smart money had been shunning MLPs. They’ve appeared dirt cheap to me for months, but the lack of buying by the Buffetts and Teppers of the world gave me pause. While I would never advocate buying a stock simply because a master of the universe has done so, it does give you that reassuring pat on the back when you feel you’re all alone in a trade and are starting to doubt yourself.
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