TORONTO (Reuters) – Berkshire Hathaway Inc’s re-investment in Suncor Energy Inc highlights the benefits of being an integrated oil company and could revive investor interest in the languishing Canadian energy sector, fund managers said.
The move is also seen by some as a wager the energy sector could benefit from a change in the guard in Canada’s oil-rich Alberta province, which has an election this year.
Berkshire - Stake - Suncor - C - Prices
Berkshire’s new 0.7 percent stake in Suncor, valued at C$488 million ($370.54 million) at current prices, is already worth 23 percent more since Berkshire bought it in the last quarter. It comes more than two years after it sold for $618 million a 1.4 percent stake it had bought in 2013 and added to in 2015.
Its re-entry is seen by analysts as a validation that Canada’s biggest oil and gas company has catalysts – such as a new incoming CEO and the eventual removal of Alberta oil curtailments – that could propel the stock higher.
Berkshire - Reasons - Investment - Suncor - Reuters
Berkshire has not publicly discussed its reasons for its recent investment in Suncor, and did not comment when reached by Reuters.
While a bet on Suncor is not seen as a play on the entire industry, major Berkshire shareholder Warren Buffett’s stature as a value investor is expected to prompt other funds to wade back into the Canadian energy sector.
People - Attention - Warren - Buffett - Play
“People always pay attention when Warren Buffett makes a play, and I don’t think it will be any different this time around,” said Mike Archibald, associate portfolio manager at AGF Investments Inc.
“It’s a great signal that foreign capital is starting to flow back to Canada as this will ultimately be the main driver of stock prices.”
Investors - Majors - Canada - Oil - Patch
Investors and some foreign majors have shunned Canada’s oil patch in recent years due to high production costs, environmental concerns, and difficulties moving crude due to clogged pipelines.
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