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Bill Gates’ Cascade Investment Boosts AutoNation Inc. (AN) Stake, Buffett Keeps Buying Phillips 66 (PSX), Plus Baker Bros.’ Latest Move

As revealed by a Form 4 filing, Warren Buffett’s holding company, Berkshire Hathaway, bought 486,804 shares of Phillips 66 (NYSE:PSX) from Friday through yesterday, at prices varying from $73.31 to $79.20 per share. After the recent purchases, Berkshire Hathaway holds an ownership stake of 74.47 million shares of the oil refiner, constituting 13.96% of its outstanding common stock. The shares of the manufacturing and logistics company are down by 7% since the beginning of 2016, but are up by 1% over the past 12 months.

The company operates through four business segments, which include midstream, chemicals, refining, and marketing and specialties. There are several key nuances about Phillips 66 that investors might find attractive, which could also explain Buffett’s bullishness. First of all, Phillips 66 (NYSE:PSX) has a strong balance sheet, as the company’s cash and cash equivalents equal $3.1 billion while its debt amounts to $8.9 billion. Hence, the net-debt-to-capital ratio of only 20% is probably among the key reasons the billionaire investor keeps buying more shares of Phillips 66. Second of all, the company’s operating cash flows generated from its refining and marketing and specialties operations are very robust despite high reliance on refining and marketing margins. For instance, the company’s fourth-quarter earnings were severely impacted by lower realized margins, which were in turn affected by a decline in global market cracks. Thirdly, Phillips 66 pays out an annualized dividend of $2.24 per share, thus offering an attractive current dividend yield of 2.97%. Phillips 66 has a forward P/E multiple of 9.74, which is slightly higher than the average of 9.1 for the oil and gas refining and marketing industry. Iridian Asset Management, founded by David Cohen and Harold Levy, cut its position in Phillips 66 (NYSE:PSX) by nearly 389,000 shares during the fourth quarter, to 4.83 million shares.

Warren Buffett
Warren Buffett
Berkshire Hathaway

In a Schedule 13D filing, Baker Bros. Advisors, managed by Julian Baker and Felix Baker, reported owning 105.20 million ordinary shares of Beigene Ltd (ADR) (NASDAQ:BGNE), which make up 24.6% of the company’s outstanding common stock. Earlier this week, the healthcare company that develops cancer therapies completed its initial public offering (IPO) of 7.59 million American Depositary Shares (ADSs), which were sold to the public at an IPO price of $24.00 per ADS. It should be noted that each ADS represents 13 ordinary shares of Beigene. Furthermore, Baker Bros. Advisors’ employees Michael Goller and Rajeev Krishana, have been on the company’s Board of Directors since April 2015 and October 2015, respectively. As already mentioned, the company focuses on developing innovative, molecularly targeted immuno-oncology drugs for the treatment of cancer, and is currently working on four clinical-stage drug candidates that are believed to have the potential to be best-in-class or first-in-class. For instance, the company’s BGB-3111 drug candidate, a potent and highly selective small molecule BTK inhibitor for the treatment of lymphomas, has demonstrated higher exposure than the only FDA-approved BTK inhibitor, called ibrutinib. Meanwhile, the stock spiked above levels of $35 after the IPO, but has been gradually declining since the beginning of the week. Even so, the stock is currently trading about by 8% from its IPO price.

Julian Baker And Felix Baker
Julian Baker And Felix Baker
Baker Bros. Advisors

Disclosure: None

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