Bloomberg News

Berkshire Takes CB&I Stake in Bet on Natural-Gas Infrastructure

May 15, 2013

Warren Buffett’s Berkshire Hathaway Inc. (A:US) took a stake in Chicago Bridge & Iron Co. in a bet that the construction company will benefit from infrastructure spending as customers liquefy natural gas and use it as a feedstock.

Buffett’s firm owned about 6.5 million shares of CB&I on March 31, Omaha, Nebraska-based Berkshire said yesterday in a regulatory filing listing its U.S. stock portfolio (2FA:US). The stake would have been valued at $376 million at yesterday’s closing price in New York.

New drilling techniques that unlock natural gas from shale and other rock formations have boosted output and spurred investment by companies that transport, store and consume the fuel. The Hague-based CB&I’s customers include some of the world’s largest energy companies, such as BP Plc, Exxon Mobil Corp. and Russia’s OAO Gazprom.

“They’re going to be a key beneficiary of infrastructure build-out associated with natural gas,” said Chase Jacobson, a William Blair & Co. analyst who rates CB&I outperform (CBI:US). “The engineering and construction companies have been talking about this next wave of investment for a couple of years now, since shale really started to become more of a story. But now we’re seeing the projects are starting to move forward, and it’s going to be a multi-year investment cycle.”

CB&I has formed ventures with Kentz Corp. and Clough Ltd. to build infrastructure related to liquefied natural gas projects in Australia and Papua New Guinea. In February, Chief Executive Officer Philip K. Asherman completed the purchase of Shaw Group Inc. in a deal valued at about $3.3 billion that expands the company’s nuclear plant building services.

Building Berkshire

Buffett didn’t respond to a request for comment sent to an assistant. A message left on CB&I’s investor relations line outside of normal business hours wasn’t returned.

Buffett, 82, and Vice Chairman Charles Munger, 89, built Berkshire through acquisitions (2FA:US) that transformed a textile maker into a business that provides insurance, hauls freight, manufactures chemicals and sells products from underwear to diamonds. They also amassed the largest equity stakes in companies including Wells Fargo & Co. (WFC:US) and Coca-Cola Co.

Berkshire boosted its stake in Wells Fargo by 4.2 percent to about 458.2 million shares (WFC:US) in the first quarter. The investment in the largest U.S. mortgage originator was valued at about $18 billion at the close of trading in New York.

“Everything that they know is just breeding more enthusiasm for Wells Fargo,” said David Sims, co-portfolio manager at Milwaukee-based Sims Capital Management LLC, which oversees Berkshire shares.

Wal-Mart Stores

Berkshire’s stake in Wal-Mart Stores Inc. (WMT:US) rose to 49.2 million shares, a 3.7 percent increase from three months earlier. The investment was valued at about $3.93 billion at yesterday’s close. Holdings of DirecTV increased 9.5 percent to 37.3 million shares as of March 31. The satellite television provider rose 1.2 percent yesterday to $65.17.

The investment in VeriSign Inc., the Internet-address database manager, was 8.2 million shares, up from 3.7 million three months earlier. Berkshire also added to stakes in National Oilwell Varco Inc., U.S. Bancorp (USB:US), and Wabco Holdings Inc.

Berkshire reduced holdings of Mondelez International Inc., Kraft Foods Group Inc. and Bank of New York Mellon Corp., while exiting stakes in General Dynamics Corp. (GD:US) and Archer-Daniels-Midland Co. (ADM:US), the filing showed.

Some of the smaller investments, including CB&I, were probably made by Berkshire investment managers, Ted Weschler and Todd Combs, Sims said. Buffett, the world’s third-richest person, has been ceding more oversight of the company’s $97.2 billion equity portfolio to the stock pickers as he prepares the company for his eventual departure.

The billionaire’s track record since taking over Berkshire in the 1960s has made him a cult figure for investors. The company’s quarterly filings (2FA:US) of its U.S. stock holdings are studied by mutual funds and individuals looking for clues about his investment strategy. The filing doesn’t say who is responsible for each pick.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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