WARREN BUFFET MAKES A CAESAR MOVE BY SELLING EXXON MOBIL!

Warren Buffet makes a Caesar investment move that results in the sell of 41,000,000 shares of Exxon Mobil for a value of $3. 9 Billion US Dollars.  Buffet bought the Exxon share around April 2, 2013 at $90.58 and sold his holdings on December 31, 2014 at $92.45.The price for Exxon share on February 19, 2015 was at $91.00. The price of a barrel of oil in November of 2013 was $97.00.

 The actual value of a barrel of oil on November 9, 2014 was $100.00 a barrel and on November 27, 2014 a barrel dropped to $70.00 moreover, by December 16, 2014 oil dropped to $55.00 a barrel. The projected price for a barrel of oil in June to December of 2015 should drop to $23.88 a barrel of oil. 

How does Buffet calculate the odds of buying or holding a stock?  The Exxon Mobil is a case study in the thinking process of  how the Buffet team approach to value investing. First, the Buffet team looked at the shock drop of oil barrel prices as the essential indicator of the actual value of Exxon Mobil.  They realized that within a 30 day period oil dropped by 30% and by December 15, 2014 the drop of oil was about 50% from the November highs.  They did not hesitate to pull the trigger and did not fall in love with the cash machine of Exxon Mobil. Remember, Fortune favors the bold!

Second, the real value of Exxon Mobil is based on the value of its oil holding and the drop in oil commodity prices.  The good news is that the Exxon Mobil share price did not reflect the actual value of price of barrel of oil and stock price allowed Buffet a margin of safety to plan for a sale Exxon Mobil at a profit.  Buffet did not take a loss and sold early enough to allow for the greater fool theory to take effect on the institutional holders of Exxon Mobil.

Third, the Buffet team realized that oil industry is in a sunset industry run by an unregulated monopoly known as OPEC.  The mis-allocation of resources and prices was the hallmark of an unstable industry.  The fact that Peak Oil is a long term outcome of the oil industry which will result in consolidations.  The deflationary environment of the commodity industry clearly places a low value marker on all proxy stocks of this industry.  The problem with oil stocks that take too long to

reflect the true value of a share.

Fourth, the central question for Buffet team is "Why should we take unknown risks in a sunset industry?" This makes sense for Buffet to look at the ratio of price to value of  a share of Exxon Mobil. The reality is that their are better industries that are more rational choice of investment capital.

Buffet decision is a turning point in the future of the oil industry.  Why would you invest your hard earned money on a an over-valued and over-priced oil stocks?  Why waste your time fighting the market and Buffet is Caesar of Omaha.