Biden win 'biggest risk' to Buffett's new deal

Has Berkshire Hathaway’s Warren Buffett lost his investing magic?

‘The Warren Buffett Shareholder’ author Lawrence Cunningham and Smead Capital Management CEO and CIO Bill Smead respond to Berkshire Hathaway’s shareholder meeting this year that featured only Warren Buffett and his possible successor Greg Abel.

A 2020 presidential election win by former Vice President Joe Biden represents the “biggest risk” to Warren Buffett’s latest deal, according to one industry expert.

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Buffett’s Berkshire Hathway on Sunday announced plans to purchase Dominion Energy’s natural gas transmission and storage network for $9.7 billion, including debt. A Biden presidency would likely lead to stricter regulations on the energy industry.

Ticker Security Last Change Change %
BRK.B BERKSHIRE HATHAWAY INC. 182.71 +3.88 +2.17%
D DOMINION ENERGY 74.78 -7.91 -9.57%

“Given all the indications with regard to all the other messages we're seeing from him, it's going to be a soliloquy to the hard left side of the party, which means anti-natural gas,” Stephen Schork, founder and editor of the daily oil subscription newsletter The Schork Report, told FOX Business. “That means passing laws.”

BUFFETT'S BERKSHIRE TO BUY DOMINION ENERGY GAS ASSETS FOR $4 BILLION

Biden named Green New Deal proponent Rep. Alexandria Ocasio-Cortez, D-N.Y., to lead his climate task force along with former Secretary of State John Kerry, who signed the Paris climate accord for the U.S.

The Green New Deal calls for "global reductions in greenhouse gas emissions from human sources of 40 to 60 percent from 2010 levels by 2030” and “net-zero global emissions by 2050.”

President Trump’s policies, which included efforts to increase production on public lands and rolling back regulations, have helped the U.S. become the world’s largest oil producer. Trump abandoned the Obama-era Paris deal in June 2017.

Berkshire’s deal for Dominion’s natural gas assets is “classic Buffett in the sense that it's a best-in-class operator whose valuation is discounted because of macro or exogenous forces,” Cathy Seifert, director at New York-based CFRA Research, told FOX Business.

The deal, which includes more than 7,700 miles of natural gas transmission lines and 20.8 billion cubic feet per day of transportation capacity, will help Berkshire increase its scale and presence in the energy space.

Seifert “wouldn’t be surprised” to see Berkshire continue to build out its energy business due to the number of distressed sellers in the space.

Eighteen energy companies have filed for bankruptcy so far this year, according to the Dallas-based law firm Haynes and Boone, exacerbated by West Texas Intermediate crude oil prices briefly plunging below zero in April.

While crude oil prices have garnered all the attention, natural gas is the energy component that has suffered through the longest period of difficulty as the space has plenty of production but not enough infrastructure to get all that product to market.

Berkshire’s deal is “pretty savvy” in the sense that a lot of the growing pains associated with getting assets out of the ground and into transportation markets have already been incurred, according to Schork.

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“Buffett is one of the guys you're going to look to and if he's making this investment, he's telling you it's probably safe to go back into the water,” Schork said. “Regardless of the politics of it all.”

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