Star investor Icahn sells 10% stake in Occidental Petroleum – Buffett buys

Icahn sells shares in oil company Occidental Petroleum
No information as to the reasons for the sale
Buffett, on the other hand, is massively increasing his Occidental holding

According to the Wall Street Journal, Icahn, who has already been described by critics as a “corporate raider” because of his very activist trading strategy, realized a profit of around one billion US dollars. Almost three years ago, Icahn began to build up a substantial share position in Occidental Petroleum. Most recently, he still owned a ten percent stake in the US oil supplier based in Houston (Texas). With the sale, Icahn’s two representatives will resign from the Occidental board.

Occidental Petroleum with strong performance

At the onset of the COVID-19 pandemic, the price of oil plummeted to a few US dollars in March 2020, dragging oil companies like Occidental Petroleum south with it. So the Occidental paper fell to less than $10. Icahn, who served as director Oliver Stone’s role model for the legendary speculator Gordon Gekko in the Hollywood film Wall Street (1987), increased his Occidental holding from 2.5 percent to 10 percent during this crisis – a textbook anti-cyclical trade, as the following months proved. Occidental’s shares were able to recover strongly in parallel with the rise in oil prices and are currently trading at well over 50 US dollars. In the current year alone, Occidental shares have more than doubled. However, it should not go unmentioned in this context that Occidental’s shares were even higher in 2019 – before the takeover of former oil competitor Anadarko Petroleum, which Warren Buffett co-financed. Icahn had strictly rejected the $38 billion Andarko deal, which he considered too expensive, and described the takeover as “one of the most ridiculous deals” he had ever seen. However, the violent conflicts that followed were settled in recent months by a “truce”.

Icahn is silent on the reason for the sale

One can only speculate as to why the 86-year-old Icahn, who despite his advanced age remains very active on the international financial markets, sold off Occidental Petroleum shares despite the strong performance. He may think other companies in the energy sector are more promising; for example, Icahn recently increased its position in much smaller Southwest Gas, a Las Vegas, Nevada natural gas supplier. On the other hand, Icahn’s exit could indicate that he now believes that the price potential of Occidental has been exhausted in view of the sharp rise in oil prices related to the Ukraine conflict and that he therefore wants to realize his book profits quickly.

Buffett increases position in Occidental Petroleum

Legendary investor Warren Buffett chose the opposite strategy and increased Berkshire Hathaway’s Occidental stake to a total of around $5.1 billion within a few days, giving Buffett almost 10 percent of the Texas hauler’s shares. Last but not least, Buffett is probably pursuing the goal of protecting himself against further price losses as a result of the ongoing war in Ukraine. While the global stock exchanges have mostly been deep red in recent weeks, the oil price and, with it, oil companies have continued to climb. The news that Buffet’s company, Berkshire Hathaway, was adding to its Occidental position sparked excitement on the penultimate Monday, March 7, with the stock jumping 12 percent.

Although Occidental has risen rapidly in recent months and is not too expensive with a price-earnings ratio of twelve – the price is still a long way from its record highs in April 2011, when Occidental’s shares were still more than 100 US dollars cost.

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