Warren Buffett has recently been increasing his stake in oil company Occidental Petroleum over the past nine days. This has boosted Berkshire Hathaway’s ownership in the Houston-based company to nearly 29%. Buffett’s interest in Occidental was sparked after he carefully read through a transcript of the company’s earnings call.
“I read every word, and this is exactly what I would be doing,” he mentioned to CNBC. The exact reasons behind Berkshire’s growing interest remain somewhat unclear. Senior energy analyst Leo Mariani from Roth Capital commented, “That’s been a question people have been asking for quite some time. I’m not sure anybody has a perfect answer.”
Berkshire’s significant involvement with Occidental first began in 2019 when it pledged $10 billion to support the company’s bid for rival Anadarko.
Buffett’s evolving energy investments
This commitment also granted Berkshire the option to purchase Occidental shares. By 2022, Berkshire obtained approval to acquire up to 50% of the company’s shares. Senior stock analyst Greggory Warren from Morningstar suggested that the increased stake reflects Buffett’s aim to diversify Berkshire’s portfolio.
“The things that Berkshire acquires in such quantities are more a result of what’s available for purchase rather than strong preferences in one direction,” he explained. Despite Buffett’s keen interest, Occidental’s overall outlook is not entirely optimistic. In early May, Morningstar reduced its fair value estimate for the company’s stock by 7% to $53 per share.
This revision was attributed to lower oil prices and the slow progress of Occidental’s intended acquisition of shale oil producer CrownRock. Berkshire’s evolving strategy and deeper investment underscore its comprehensive approach. It leverages established relationships and explores opportunities in the energy sector, adapting to market fluctuations.
