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Even Warren is loading up on oil.

Warren Buffett Guzzles Up Occidental's Stock

Dan Burrows, Contributing Writer
Mon, March 7, 2022, 7:08 AM
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Warren Buffett has been absolutely hoovering up stock in Occidental Petroleum (OXY, $56.15). In a flurry of recent purchases, Berkshire Hathaway (BRK.B, $325.34) bought 91 million OXY shares, or 9.8% of the integrated oil and gas company's shares outstanding.

The addition to the Berkshire Hathaway equity portfolio coincides with the ongoing melt-up in energy prices, which was sparked by the Russian invasion of Ukraine. Global benchmark Brent crude oil futures briefly topped $130 a barrel in the wee hours of Monday trading, and have gained about 30% over the past month.

The common shares Berkshire just purchased add to its already substantial exposure to the energy firm, which includes $10 billion worth of 8% preferred shares, as well as 84 million warrants to purchase OXY stock. Occidental shares must trade above the warrants' exercise price of $59.62 for the warrants to be in the money.

Buffett received the warrants as an equity "kicker" when he bought the preferred shares in 2019. The funding provided by Buffett helped Occidental win its $55 billion bidding war against Chevron (CVX) to acquire Anadarko Petroleum.

If nothing else, Buffett's buying spree has clearly contributed to OXY stock's dramatic outperformance of late. Berkshire Hathaway purchased more than 60 million OXY shares between March 2 and March 4 – and OXY stock jumped more than 28% over those sessions.

Indeed, on March 4 alone, Berkshire picked up a total of 34 million shares. Occidental closed the session up 17.6%, on abnormally heavy volume. For the year-to-date, OXY stock has gained 94% vs. a 35% increase for the S&P 500 energy sector.

Occidental Petroleum isn't the only recent Buffett move intended to expand BRK.B's exposure to the energy sector. Berkshire Hathaway upped its stake in Chevron by 33% in the fourth quarter of 2021, as well. The holding company held 38.2 million shares in the Dow component as of Dec. 31, a stake which is currently worth $6.1 billion.

Both CVX and OXY get consensus Buy recommendations from Wall Street analysts, but they have significantly greater optimism regarding the former's prospects than the latter's.

Of the 29 analysts issuing opinions on CVX stock tracked by S&P Global Market Intelligence, 13 call it a Strong Buy, seven say Buy and nine rate it at Hold.

As for OXY, the Street's view is decidedly more mixed. Ten analysts call it a Strong Buy, three say Buy, 11 have it at Hold, one calls it a Sell and two say Strong Sell.