Warren Buffett’s Berkshire Hathaway made significant stock purchases during a December market sell-off. The company bought 8.9 million shares of Occidental Petroleum for $405 million over three days, pushing its stake above 28%. During the same period, Berkshire acquired about 5 million shares of another undisclosed company for $113 million and roughly 234,000 shares of a third firm for $45 million.
These smaller stakes may have been chosen by Buffett’s investing lieutenants. In total, Berkshire bought more than $560 million worth of stocks in three sessions. The 94-year-old investor seemed to take advantage of a downturn that made these stocks much cheaper.
Occidental shares have dropped over 10% this month and 24% in 2024. The energy company is now Berkshire’s sixth-largest equity holding. However, Buffett has ruled out a full takeover of Occidental.
The sell-off in Sirius XM has been even more dramatic. The satellite radio company is in a six-day losing streak, falling 23% this month and 62% this year. Berkshire’s stake in SiriusXM has risen to about 35% after billionaire John Malone’s Liberty Media combined its tracking stocks with the rest of the company.
Internet infrastructure company VeriSign has also had a tough year, with its stock down 6% in 2024 and underperforming the tech sector.
Buffett’s Occidental investment grows
Berkshire first bought into VeriSign in 2013 and hasn’t adjusted its stake in years.
Buffett praised Occidental CEO Vicki Hollub in his 2023 letter to shareholders, stating, “Under Vicki Hollub’s leadership, Occidental is doing the right things for both its country and its owners. Vicki knows how to separate oil from rock [fracking], and that’s an uncommon talent, valuable to her shareholders and to her country.”
Despite the increasing focus on renewable energy, oil and gas remain far from obsolete. According to the U.S. Energy Information Administration, 60% of the country’s electricity still comes from fossil fuels, with more than 40% generated from natural gas.
Globally, electric vehicles are becoming mainstream, but only one in five vehicles sold last year was an EV. The growth in EV demand has slowed this year due to inadequate charging infrastructure. Goldman Sachs expects global oil demand to grow before peaking at 110 million barrels per day in 2035 and remaining near that level for at least five more years.
OPEC projects peak oil will not occur until 2050, with demand reaching over 120 million barrels per day. Occidental is also preparing for the future carbon-free era. The company is well-positioned to capitalize on the carbon-capture industry, which is expected to grow at an annualized rate of 22% between now and 2033.
The recent pullback in Occidental’s stock price makes it an attractive value play, with shares currently priced 30% below their consensus price target of $61.48. Buffett’s substantial investment suggests confidence in the company’s future. While no investment is bulletproof, Occidental’s current undervaluation and strategic positioning make it a compelling option for those seeking an undervalued dividend payer.
Buffett’s continued confidence in the company could be a strong signal for investors considering adding Occidental to their portfolios.
