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When Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A, BRK-B) decides to purchase more shares of a company, the stock market listens. Berkshire has once again increased its investment in Occidental Petroleum (NYSE: OXY), raising its stake to nearly 29%. Buffett, the Oracle of Omaha, recently acquired an additional 7.3 million shares of Occidental, reinforcing his lack of interest in acquiring control over the company. Despite this, the Houston-based oil and gas producer has become a frequent acquisition target for Berkshire, especially given that its stock is around 12% lower than its peak in April.
Following Berkshire's latest filing on Monday, Occidental witnessed a 1% gain on Tuesday, trading above $61. According to James Shanahan, an equity analyst at Edward Jones, Buffett often buys more Occidental shares when the price hovers near or drops below $60. Shanahan highlighted that this purchasing activity helps establish a price floor for the stock. He also noted that Berkshire’s position in Occidental, valued at $15.4 billion, ranks as its sixth-largest stock holding. Unsurprisingly, the conglomerate's top holding remains Apple (NASDAQ: AAPL), constituting about 20% of Berkshire's market capitalization, even after trimming its position in the tech giant earlier this year.
Energy stocks remain a focal point for Berkshire, with Chevron (NYSE: CVX). Despite some recent sales, energy stocks remain a focal point for Berkshire, with Chevron (NYSE: CVX) still among the top five holdings. Combined with Berkshire’s preferred shares in Occidental, the total investment in oil-related assets approaches $43 billion. Interestingly, this figure has ranged between $41 billion and $51 billion at the end of each quarter since March 2022—an indication of Buffett's unwavering commitment to the oil sector.
Buffett’s endorsement of Occidental Petroleum goes beyond mere stock purchases. He has publicly supported the company’s CEO, Vicki Hollub, and played a crucial role in financing Occidental’s acquisition of Anadarko Petroleum in 2019. More recently, in December, Occidental announced a $12 billion acquisition of CrownRock, a Midland, Texas-based oil and gas producer. In a significant vote of confidence, Berkshire Hathaway swiftly bought nearly $600 million of Occidental shares over three days following the acquisition news.
Occidental has also been active in adjusting its portfolio and selling assets to fund the CrownRock acquisition. During a May interview, Hollub mentioned to Yahoo Finance that the company plans to scale back its stock buyback program over the next few years, focusing instead on debt reduction. She elaborated that the previous buyback initiatives were driven by the company’s belief that its stock was undervalued. Last year, Occidental distributed $600 million in dividends, repurchased $1.8 billion of common shares, and redeemed $1.5 billion of preferred shares.
In the volatile world of oil stocks, Occidental registered a 5% decline in 2023 following an exceptional 119% increase the prior year, when oil prices soared, making it the top performer in the S&P 500. Traders eagerly anticipate Buffett's next move, but one thing is clear—when Berkshire buys, the markets take note.
