Warren Buffett’s Investment Strategy Drives Major Stake in Houston-Based Oil Producer
Warren Buffett’s Berkshire Hathaway has significantly increased its stake in Occidental Petroleum (OXY) over the past nine trading sessions, bringing its ownership to nearly 29% of the Houston-based oil and gas producer. According to regulatory filings, the Omaha-based conglomerate purchased an additional 7.3 million shares of Occidental, with purchase prices hovering around $60 per share, between June 5 and June 16.
These recent acquisitions raise Berkshire’s total holding to over 255 million shares, equivalent to a 28.8% stake. This solidifies Occidental as Berkshire’s sixth-largest stock holding and establishes Berkshire as the largest institutional investor in Occidental.
In addition to the common stock, Berkshire Hathaway holds $10 billion in Occidental preferred stock and warrants to purchase another 83.9 million common shares for $5 billion, or $59.62 each. These warrants, acquired as part of a 2019 deal to finance Occidental’s purchase of Anadarko Petroleum, are currently “in the money” with Occidental’s stock closing at $60.20 on Monday. If fully exercised, these warrants could increase Berkshire’s ownership stake to over 40%.
Despite the significant stake, Buffett has made it clear that he does not intend to take full control of the company, dispelling rumors of a takeover. This clarification comes after Berkshire received regulatory approval to purchase up to a 50% stake in Occidental.
Buffett’s investment in Occidental was driven by his thorough analysis of the company’s performance. He stated that he began buying shares after reading a transcript of Occidental’s earnings conference call, which aligned with his investment philosophy. “I read every word, and said this is exactly what I would be doing,” Buffett told CNBC. He praised Occidental CEO Vicki Hollub for her effective management, stating she is “running the company the right way.”
Occidental’s stock, which offers a 1.5% dividend yield, has remained relatively flat this year after a 5% decline in 2023. The stock’s stability and dividend yield make it an attractive investment for Berkshire Hathaway.
Buffett’s strategic move to increase his stake in Occidental highlights his ability to capitalize on market volatility. In early 2022, he leveraged market conditions to acquire 14% of the energy firm, valued at over $7 billion, in just two weeks. He remarked on the scale of this acquisition, noting it would be nearly impossible to achieve similar ownership stakes in other large American companies.
As Berkshire Hathaway continues to build its position in Occidental, the investment community closely watches Buffett’s moves, reflecting his profound impact on market dynamics and investment strategies.
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