Warren Buffett remains bullish on the oil sector: Buffett’s Berkshire Hathaway buys Occidental Petroleum shares again

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• Buffett increases stake in Occidental Petroleum
• Occidental was Berkshire’s seventh-largest holding in the fourth quarter of 2022
• After a strong 2022, the Occidental share has recently weakened

With his multi-billion dollar investment in Occidental Petroleum, Warren Buffett has once again shown a golden touch: Since the oil company’s stock was first bought in 2019, the Occidental share price has risen rapidly. Especially last year, which will actually go down in history as an extremely weak stock market year given the inflation and interest rate concerns, the Occidental papers staged an impressive rally. Occidental was even the strongest stock in the broad S&P 500 index in 2022. After the intensive acquisitions in the first few months of last year, however, Buffett’s Occidental holdings have recently calmed down. But now the Oracle of Omaha used the recent weakness in the share price to get hold of the oil company from Los Angeles again. Warren Buffett appears to be full of optimism about Occidental’s future. In a recent interview with CNBC’s Brian Sullivan, Occidental CEO Vicki Hollub said she met the 92-year-old investor “just a few days ago.” Hollub said they’ve talked extensively about the oil and gas industry and the technology that goes with it.

Buffett spends millions on new Occidental paper

Buffett’s investment holding company Berkshire Hathaway bought a total of 5.8 million shares of Occidental on March 3, 6 and 7, according to a regulatory filing with the Securities and Exchange Commission (SEC). He paid a price between US$59.85 and US$61.90 for each. The block of shares was valued at approximately $350 million at the time of purchase. With the recent purchase, Berkshire is upping its stakes for the first time since September 2022. The investment holding company now owns 200.2 million shares of Occidental Petroleum worth approximately $12 billion. With the acquisition, Berkshire increased its stake in Occidental from 21.4 percent to 22.2 percent.

Occidental Petroleum in the top ten of the Berkshire Hathaway portfolio

Occidental Petroleum is among the top 10 holdings in Berkshire’s portfolio. In addition to the well-known Buffett favorites Apple and Coca-Cola, this also includes other US corporate icons such as Kraft Heinz, American Express, Chevron and Bank of America. As the SEC’s F-13 form showed, Occidental was Berkshire’s seventh-largest holding as of the fourth quarter of 2022. As of December 31, 2022, Berkshire owned exactly 194,351,650 Occidental shares, which at the time were valued at $12.24 billion and accounted for 4.09 percent of Berkshire’s total portfolio.

Will 2023 be a difficult year for Occidental Petroleum?

Warren Buffett is known as a contrarian investor — he traditionally buys stocks he believes are undervalued very aggressively while avoiding hyped growth stocks. At Occidental, too, he used the lower entry price to further increase his position. In the current calendar year, Occidental’s shares are currently 3.87 percent down at a unit price of 60.58 US dollars (as of the closing price on March 9, 2023), which means that they have performed worse than the general upward trend in recent weeks trending overall market. An important reason for Occidental’s current underperformance lies in oil prices, which have fallen sharply since spring 2022: a barrel of WTI crude oil has lost almost 30 percent in value in the last twelve months. After all, the price of oil has stabilized in recent weeks and has been trending sideways ever since. As a result of the decline in energy prices in recent weeks, many oil stocks – in addition to Occidental, other global players such as Shell, TotalEnergies, ExxonMobil and Chevron should be mentioned here – have come back from their twelve-month highs.

So, after the strong upswing, is there now a sobering up in the oil sector? Will 2023 be a difficult year for Occidental, Chevron, Shell & Co.? Buffett’s purchase of Occidental shares speaks against this assumption, especially since the investor legend has repeatedly demonstrated a phenomenal instinct for investment decisions. So it shouldn’t surprise many investors too much this time if the Occidental follow-up purchase turns out to be a good decision. After all, the dividend increase of a good 38 percent announced at the end of February also indicates that Occidental seems to be bursting with strength.

Editorial office finanzen.net

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