Follow Warren Buffet in this stock?

Over the almost three years we have been posting on this blog we have constantly suggested Canadian oil stocks as good safe picks.  Honestly we have made some picks that were not good up to now.  ERF which was our favorite for many years when we exited earlier this spring, due to uncertainty about it's dividend and management that had not been truthful is down.  CVE, which we considered a long term pick, has not done well since we picked it.  We also suggested one take a look at COSWF and it too has been down over the last two years.  So accepting now what we post on these Canadian oil stocks might not be wise.  

However maybe you will consider what Warren Buffet is doing in Canada.  For several quarters now Mr. Buffet has been buying and buying some more Suncor Energy.  If you take a look at the stock trend line for SU you will find that it too has not done well over the last year.  In fact two years out this stock is flat.   So with a 2% dividend I suppose one can say they are up a little, unlike CVE, ERF, and COSWF, which are down even with the higher dividend payout in these two stocks.  It appears from what can be surmised from the release of stock buys from Berkshire Hathaway BRK.B, Mr. Buffet's stock, that he added even more shares of SU over the past quarter.  So what is one to make of these buys by the Oracle of Omaha. 

Frankly I do not know and neither does anyone else from what I can search and read.  SU is a major player in the oil sands of Canada as is COSWF, which is the major holder of the oil sands real estate. Imperial Oil, IMO, is the other major player here and it's stock is slightly down over two years.   The majority holder of IMO is Exxon Mobile so there is some major money in this space.  COSWF has been rumored for some time to be a buy out candidate, but as yet no one has pulled the trigger.  Exxon has been the most rumored buyer of COSWF so as to cement their place in the oil sands project.  There has been some noise about Mr. Buffet buying out COSWF.  

Now here are the pertinent facts we know.  One BRK.B has significant profits in the railroads hauling oil out this area for some time now via the company's rail holdings in Burlington Northern.  In fact the cash flow from transporting oil has been huge the last year.  So owning more of these oil sands makes some sense due to the increasing use of Canadian oil assets in the US and the Gulf oil refineries.  Note that BRK.B has big holdings in Phillips 66, PSX, which owns refineries on this Gulf end.  Warren has big money in oil and notably Canadian oil already.  Let's also consider that Exxon has interest here in not allowing a big player take over oil assets in the oil sands that might damage their investments there.  So lots of angles here and we have no clue which one to follow. 

There is another wildcard here too and that is the Keystone XL Pipeline.  This pipeline that would transport oil from the oil sands to Gulf refineries and would increase the use of Canadian oil.  It could also hurt the profits on BRK.B's railroad assets.   Of course this pipeline is being held up by Obama due to assumed environmental concerns or more precisely appeasing his environmental supporters.  Unions are hopping mad due to the holdup since the pipeline would produce lots of high paying jobs with juicy union dues. Lots of players and lots of angles.  Could be Mr. Buffet knows Obama is going to approve the pipeline at some point and there will be enough oil flowing south that both the pipeline and the railroads will have lots of business.  Trust us here there is enough oil in Canada to supply oil to the US for hundreds of years. 

There is also plenty of oil here in the US to make us all but energy independent in a decade and if that occurs Mr. Buffet loses some of his investment in SU and his railroads lose business.  So is maybe Warren is pushing Obama to approve the pipeline to make his Canadian investments good.  So you see there is no way to be sure with any stocks in this sector. 

Finally is the fact oil use is going to decline in the US due to the huge supply of cheap natural gas coming on the market via fracking.  How much decline is to be seen, but it is going to decline and along with less dependence on the middle east too. 

With all that said here are some ideas.  COSWF has a 7% dividend and could pay you while you wait.  CVE has a 3% dividend and it's own refinery.  ERF seems to have regained it's footing and has a 6% dividend as well and would benefit from the pipeline. SU has the upside of being in the Buffet portfolio.  IMO has the huge backing of Exxon.  Take your pick as it seems sooner or later Warren Buffet is rarely wrong.