Warren Buffett's Favorite Commodity
Every investor with a dime in the market has followed Warren Buffett at one point or another during his 78-year investing career.
Seeing the Oracle of Omaha amass an $88.1 billion fortune, who wouldn't?
What you may not realize, however, is that Buffett's first move in the investing world was one he's gone back to time and again.
Warren's first trade was an oil stock.
At the time, he was trying to capitalize on an undervalued stock.
It may have been the first, but it certainly wasn't the last time Buffett found a lush opportunity in the energy sector.
Buffett's $10 Billion Oil Bet
Back in 2009, just as oil started gushing out of the ground in North Dakota, he made a $54 billion deal (debt included) to buy Burlington Northern Santa Fe. He saw something many investors missed: that the Bakken oil boom was about to cause a serious bottleneck in the state's oil pipelines.
That was a decade ago, and he's at it again.
Except this time, Buffett is spending a little bit more than the $228 he paid for his first investment, six shares of Cities Services.
Today, he's investing $10 billion in one of the largest oil stocks in the United States.
But you and I both know that all oil plays weren't created equal.
And after Saudi Arabia dropped the bombshell that the mighty Ghawar oil field wasn't pumping out the amount of crude that everyone thought, Texas' Permian Basin - where 4.1 million barrels will be extracted every day in May - just became the largest oil play on the planet.
You can understand why Warren would want to dip his hands in that honeypot.
After Chevron's recent announcement that it was buying Anadarko Petroleum for approximately $50 billion (including debt), Buffett couldn't help making a move.
Last week, Berkshire Hathaway said it was investing $10 billion in Occidental Petroleum to steal Anadarko out from under Chevron.
If Occidental successfully outbids Chevron, Berkshire stands to receive preferred stock that will pay out an annual dividend of 8%.
That's a cool $800 million a year, for those of you keeping count.
Let's be fair; was there ever a doubt that Buffett was looking at the long term here?
Supporting Occidental's play for Anadarko fits his M.O. perfectly, and the value behind this new deal is worth nearly $75 per share for Anadarko investors.
We're about to see how desperate Chevron is to expand its acreage in the Delaware Basin in West Texas.
Unless a rabbit gets pulled out of a hat and they increase their bid, Occidental and Berkshire are going to walk away the victors.
But now let me show you the real value behind Buffett's latest oil bet.
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The Real Winner Behind Buffett's $10 Billion Oil Bet
Although the Permian Basin is now officially the world's top oil field, you may find that the most valuable investments in the area aren't drillers right now.
Look, I don't want you to think you can't make a fortune off of Permian drillers in the years ahead.
You can.
The flood of oil flowing out of those oil wells in the Permian have become a vital source of crude for more than just the United States.
More and more of that light, sweet Texas Tea is being shipped to global markets now that the export ban has been lifted.
The U.S. is exporting over 3 million barrels of crude oil per day right now.
And if it hasn't become clear yet, Texas will replace (if it hasn't already!) Saudi Arabia as the world's largest swing producer.
There's one slight hitch, unfortunately.
We're seeing history repeat itself as the lack of infrastructure in the Permian Basin has led to pipelines reaching full capacity.
And what some elite investors are quickly starting to realize is that a small group of America's best pipeline investments are not only paying us regular checks as revenues start pouring in, but some are willing to pay you a higher annual yield than Buffett will receive from his preferred shares!
It's time you learn more about these opportunities.
Just click here for the full details.
Until next time,
Keith Kohl
@KeithKohl1 on TwitterA trueinsider in the energy markets, Keith is one of few financialreporters to have visited the Alberta oil sands. His research has helpedthousands of investors capitalize from the rapidly changing face ofenergy. Keith connects with hundreds of thousands of readers as theManaging Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, theHaynesville Shale, and the Marcellus natural gas formations - all ahead of the mainstream media. For more onKeith, go to his editor's page.