During his illustrious career, Warren Buffett has ventured into a vast number of market sectors.
With generous exposure to companies including Wells Fargo , Coca Cola , Johnson & Johnson and Wal-Mart , the Oracle of Omaha has built an investment portfolio that will allow him to not only profit during times of prosperity, but also weather economic storms down the road.
Energy is a major component of Buffett's empire.
Two clear examples of Buffett's foray into the energy industry can be seen through his investments in Exxon Mobil and ConocoPhillips . The exposure to these two firms has given Buffett direct access to the global oil markets.
Buffett's energy exposure extends well beyond oil. Through his various investments and Berkshire Hathaway subsidiaries, the investor has expanded his reach across the energy spectrum, gaining access to an array of resources including natural gas, coal, wind energy and batteries.
Buffett's bets on Exxon and ConocoPhillips also provide the investor with ample exposure to the natural gas industry. These integrated energy giants have been expanding their reach into this business, hoping to profit from growing interest in the fuel.
According to a report from Trefis, natural gas exposure accounts for 7 percent of Conoco's stock value. Meanwhile, for Exxon, the resource accounts for 11 percent.
Buffett's exposure to coal can be traced back to his investment in Burlington Northern Santa Fe Railroad in early 2010. Although Buffett has advertised the landmark deal as an all-in bet on the U.S. economy, market commentators and analysts quickly realized that the deal could also be seen as a proxy bet on the long-term prospects of the coal industry. As a major hauler of coal, BNSF's performance over the long run will be heavily influenced by investor interest and global demand for the black rock.
In late 2010, Buffett's interest in coal was once again thrust into the spotlight after he and fellow billionaire Bill Gates visited Arch Coal's Black Thunder Mine in Wyoming.
Through the MidAmerican branch of Berkshire Hathaway, Buffett has taken dramatic steps into the realm of wind energy. According to the MidAmerican Energy website, the company boasts over 1,300 megawatts of facilities, making it the top wind energy generator among utilities firms in the nation.
In early April, Buffett's firm expressed interest in expanding his exposure to wind energy further. According to Bloomberg, Berkshire Hathaway is considering the possibility of using wind turbines to power BNSF railroad lines.
Given his past disinterest in the technology sector, Buffett's decision to purchase a 10 percent stake in the Chinese electric car company BYD is one of his more unusual investments in recent memory. This venture, however, has allowed the investor to gain first hand exposure to the future of the automobile industry as well as the expansion of clean energy.
The alternative energy industry is inherently volatile. Therefore, it is not unusual that Buffett's investment in BYD has been jittery at times. Looking ahead, however, this investment should prove fruitful as the electric car industry continues to grow and expand.
One of the most notable qualities of Buffett's investing style is his long-time horizons. As nations recover and grow, energy demand looks set to continue higher. By spreading his assets into the vast reaches of the spectrum, Buffett's portfolio is prepared to benefit both today and years down the road.
About the author:
In addition to writing ETF Action, Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
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