Warren Buffett: HOW HE MADE 720% IN PETROCHINA 💰🛢 Everything he ever said about the trade 🏭⚫

In 2003, Warren Buffett and Charlie Munger bought stock in PetroChina. Four years later, in 2007, they sold the stake again, making a whopping 720% return in only four years.

This is everything they have ever said at all Berkshire Hathaway meetings about PetroChina.

We'll hear everything they said during the 2003 meeting, about why they bought the stock, and follow their comments through to 2008 when they explained why they sold PetroChina.

Warren Buffett and Charlie Munger are known for being very bullish on America, so it came as a surprise in 2003 when it was disclosed that they had built a position in this Chinese oil company.

PetroChina has in recent years been delisted from the US stock market and is no longer traded on the NYSE (New York Stock Exchange).
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This is all they ever said:

We don’t make any great judgment about China. You probably know more about China than I do. We simply look at investments around the world and we try to buy into things that we think offer the most value

We would regard the United States as number one because we understand the game the best here.

We think we understand something like the oil business in China reasonably well.

The Chinese government is firmly in control of PetroChina. I mean, if we vote with the Chinese government, the two of us will control PetroChina.

PetroChina itself is not a complicated or opaque company. You know, the country, you know, has obviously, different characteristics in many respects than the United States.

But the company is very similar to big oil companies in the world. I — and I — PetroChina may have been the fourth largest — fourth most profitable — oil company in the world last year.

But they produce 80 or 85 percent as much crude daily as Exxon does, as I remember. And it’s a big, big company. And it’s not complicated.

But a big integrated oil company, it’s fairly easy to get your mind around the economic characteristics that will exist in the business

Actually their annual report may well tell you more about that business, you know, than you will find from reading the reports of other oil giants.

They do one thing that I particularly like, which other oil companies don’t, at least to my knowledge, is that they tell you they will pay out X percent, I think it’s 45 percent of their earnings, absent some change in policy.

But I like the idea of knowing in a big enterprise like that that 45 percent of what they earn is going to come to Berkshire, and the remainder will be plowed back.

It was bought not because it was in China, but it was bought simply because it was very, very cheap in relation to earnings, in relation to reserves, in relation to daily oil production, and relation to refining capacity.

Whatever metric you wanted to use, it was far cheaper than Exxon, or BP, or Shell, or companies like that.

Now, you can say it should be cheaper, because you don’t what’ll happen with it 90 percent owned by the government in China, and that’s obviously a factor that what — you stick in valuation. But I did not think that was a factor that accounted for the huge differential in the price at which it could be bought.

CHARLIE MUNGER: If a thing is cheap enough, obviously you can afford a little more country risk, or regulatory risk, or whatever. This is not complicated.

Yukos, as you know, is a very big Russian oil company. And in evaluating Russia versus China, in terms of country risk, you know, you can make your own judgments.

But in our view, something like PetroChina was both cheaper and had less risk. But other people might see that differently.

At the time we bought it, the total market value was 35 billion. So we bought it at about three times what it earned last year. It does not have unusual amounts of leverage.

So, if you can buy it at three-times earnings, what turned out to be three times earnings, and you get 45 percent of 33 percent, you know, you’re getting a 15 percent yield on your — cash yield — on your investment.
It’s a very good annual report. Chinese government owns 90 percent of the company

But it’s, you know, it’s a very major business and a very, very attractive — at what was a very attractive price.

We would have bought more but the price jumped up.

They’ve got large gas reserves, which they’re starting to develop now.

Much larger business than most of the — well, just about any oil company in the world, except for BP and Exxon Mobil

We just sit in the office and read those things, and we were able to put 400 million out that’s now worth about a billion-two.

Yukos, which is the big oil company in Russia, was probably far better known among the investment community in the United States than PetroChina.

PetroChina, in my view, was far cheaper. And I felt that the economic climate was likely to be better in China.

The discount at which PetroChina was selling, compared to other international oil companies, was ridiculous. That’s why we bought it.