Should You Follow Buffett’s Energy Strategy Into 2021?

For decades, Berkshire Hathaway (NYSE:BRK.B) chairman and CEO Warren Buffett maintained a pretty conservative approach to investing, only buying shares of businesses he was well acquainted with. As such, Buffett avoided tech and energy stocks before finally pulling the trigger on PetroChina Co. (NYSE:PTR) in 2002 and Apple Inc. (NASDAQ:AAPL) in 2011. The Oracle’s foray into energy and tech initially paid off after he realized a tidy $3.5B profit on PetroChina while his $90 billion Apple stake now represents a ridiculous 20% of Berkshire Hathaway’s market value.

Unfortunately, the same can hardly be said about Buffett’s more recent energy picks.

Over the years, Berkshire Hathaway has lost several billions of dollars in its ConocoPhillips (NYSE:COP) stake as well as its Phillips 66 (NYSE:PSX) spinoff, eventually cutting ties with PSX at the depth of the oil price crash in May 2020.

Still, Berkshire Hathaway has maintained significant energy stakes that could pay off handsomely now that the oil and gas sector appears to be on a firm rebound.

Here are three energy stocks owned by Buffett that deserve your attention.

#1. Dominion Energy Berkshire Hathaway has always operated on Buffett’s famous ethos of buying when the market is fearful and selling when it gets greedy. It, therefore, came as a huge surprise that the giant conglomerate remained muted when the market crashed in April despite sitting in a massive $137 billion cash hoard.

Buffett’s rationale was simple: They had not done anything because they had not seen anything that attractive to do.

However, in July, Berkshire finally pulled the trigger and bought natural gas transmission and storage assets of Dominion Energy Inc. (NYSE:D), paying $4 billion in cash for the assets, and assuming $5.7 billion in debt.

Under the deal, Berkshire Hathaway Energy acquired 100% of Dominion Energy Transmission, Carolina Gas Transmission and Questar Pipeline as well as 50% of Iroquois Gas Transmission System. Berkshire also landed 25% of Cove Point LNG, one of just six export-import and storage facilities for liquefied natural gas in the U.S. Related: The World’s Most Controversial Pipeline Project Enters Its Final Phase

The purchase greatly increases Berkshire’s footprint in the natural gas business, increasing its carrying market share to 18% of all interstate natural gas transmission in the United States up from 8% previously.

And that might turn out to be one of Buffett’s better energy buys.

With bond yields stuck at historic lows, Barron’s recently said that the best yield opportunities are clustered in the equity markets, ranking energy pipelines as the best income investment opportunity for 2021 ahead of dividend stocks, electric utilities, REITs, telecoms, convertibles, and junk bonds in that order.

Dominion Energy has been selling off after recently cutting its dividend, but thankfully, its peers Enterprise Products Partners (NYSE:EPD) and Salient Midstream & MLP (NYSE:SMM) are…