Warren Buffett PetroChina Investment (NYSE: PTR). Buffett invested $488 million in PetroChina and made close to 9x his investment in 5 years. The principles of value investing do not just work in the United States; they work anywhere there are markets where there is a Mr. Market who tosses irrational prices at you every day. You just have to pick the fat pitches and swing at them.
In one of the few investments in foreign companies Buffett has made thus far, Buffett bought 1.3% of PetroChina for $488 million in 2002.
Warren Buffett Investment in PetroChina
Buffett felt confident that PetroChina was undervalued – he noted in his annual letter to shareholders, “Charlie and I then felt the company was worth about $100 billion”. Buffett’s $488 million investment in 1.3% of PetroChina valued it at only $38 billion, so he believed PetroChina will significantly increase in value in the coming years. The big disparity between the market price and his estimate of intrinsic value provided a wide margin of safety for Warren Buffett and Berkshire Hathaway.
He was proved more than right – by 2007, the effects of rising oil prices and the competence of PetroChina management in expanding the company’s oil and gas reserves led the company to be valued at $275 million. Buffett thus was able to sell his holdings at $4 billion, allowing him to make many times his original investment in less than 5 years.