Warren Buffett’s Berkshire Hathaway has been investing heavily in Occidental Petroleum. The company now owns over 20% of Occidental’s shares. Buffett began buying Occidental stock in 2019.
Since then, he has continued to increase his stake. In August 2022, Berkshire received approval from regulators to purchase up to 50% of Occidental’s common stock. Analysts believe Buffett sees potential in Occidental for several reasons.
First, the company has valuable assets, including its chemical business and shale oil holdings in the Permian Basin. Occidental is also focused on paying down debt and increasing its dividend. “We see value in Oxy’s high-quality asset base and its continued efforts to pay down debt and return more capital to shareholders,” said Neal Dingmann, an analyst at Truist Securities.
Buffett’s increasing Occidental shares
Another factor may be Buffett’s bullish outlook on oil prices. Occidental’s profits are closely tied to the price of crude.
If oil prices rise, the company stands to benefit. However, some question whether Occidental is a smart investment currently. The stock has already risen sharply since Buffett began buying it.
Its valuation may be getting stretched compared to its peers. “Occidental is trading at a premium to other oil and gas companies,” noted Paul Sankey, an analyst at Sankey Research. “Investors need to be cautious about chasing the stock at these levels.”
Only time will tell if Buffett’s big bet on Occidental pays off.
Many on Wall Street are watching closely to see the legendary investor’s next move. His heavy investment has certainly put a spotlight on the oil and gas company.
