Eric Schleien
A lot of people have been asking me about the Buffett's investment in ConocoPhillips. First of all it's cheap by the common metrics:
Price/Earnings of 5.5Price/Book of 1.28EV/Revenue of 0.72EV/EBITDA of 3.8Return on Equity of 25%Return on Assets of 13%
I think this could be more of a Buffett type trade (Such as investing in Gap) than his buy and hold forever investments (Such as Coca-Cola or GEICO).
I think investing in Conoco is Buffett's way of buying in at a good company at a cheap price with a particular catalyst, the price of Natural Gas will rise.
Now of course, I can't get into Mr. Buffet's head but this is why I would suspect someone would buy a company who has a tremendous exposure to natural gas. Again, he's doing this with a margin of safety as the company he's investing in is cheap by a valuation standpoint.
I myself think natural gas is cheap and you can see my reasoning here.
Also the guys at Chesapeake Energy (CHK) thinks so too
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