Now that hedge funds and large investors are publicly reporting their holdings as of December 31 as well as their transactions during the fourth quarter, we are hearing a great deal of conjecture about the importance of these reports.
The topic du jour seems to be Berkshire Hathaway's (BRK-A) "exit" from the energy sector -- having sold its entire investment ($3.8 billion) in long-time Buffett favorite ExxonMobil (XOM) and also its small ($33million) stake in ConocoPhillips (COP).
Berkshire wasn't alone. In addition to Uncle Warren "giving up on ExxonMobil," we have heard about many other large, well known funds reducing or eliminating their exposure to the energy sector as of December 31:
- David Tepper's Appaloosa Management
Halliburton (HAL) ¿ Eliminated - Schlumberger (SLB) ¿ Eliminated
- Bruce Berkowitz's Fairholme Fund
Chesapeake Energy (CHK) ¿ Eliminated - BP p.l.c. (BP) ¿ Eliminated
- David Einhorn's Greenlight Capital
- Anadarko Petroleum (APC) ¿ Eliminated
- BP p.l.c. (BP) ¿ Eliminated
- Steven Cohen's Point72 Family Office
- Southwestern Energy (SWN) ¿ Eliminated
- Occidental Petroleum (OXY) ¿ Eliminated
While 13f filings are notoriously imperfect as they arrive a full 45 days after the fact, is there any other disadvantage to the binary interpretation of this information? How about another possible incentive large pools of investment capital have for selling positions toward the end of the year: Tax losses.
We all know that the entire energy sector took a beating last year, especially during the fourth quarter, as oil prices were more than cut in half. But perhaps these funds saw this as an opportunity to take losses against gains in other parts of their portfolios and took it. I think it is lazy to try and infer too much from a list of buys and sells.
In theory, there is a chance that the funds above took losses on energy shares late last year with the intention of waiting out the 31-day "wash sale" period to elapse, and then buying back the exact same positions with fresh cost basis."
Is it necessarily a foregone conclusion that the smart money -- as represented by the aforementioned large investors -- has given up on their energy investments? That you should do the same? I can't say, but I don't think the answer is definitively 'yes,' as you may be hearing in the financial media this week.
As usual there is likely more to the story, and we may learn more still in next quarter's 13f filings."
* 13f information compiled from Valuewalk.
