Warren Buffett Adds To Massive Stake In Occidental Petroleum, Buying The Dip After Oil Prices Drop

Topline

With oil prices down this month, billionaire investor Warren Buffett is once again buying the dip by adding to one of his favorite energy stocks, as his investing conglomerate Berkshire Hathaway purchased roughly $500 million worth of Occidental Petroleum shares this week.

The famed investor now owns nearly one fifth of the energy giant.

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Key Facts

Buffett’s Berkshire Hathaway purchased roughly 9.5 million shares of Occidental over the past week at a cost of nearly $530 million, according to a new regulatory filing late on Wednesday.

After a buying spree that started in late February, Buffett’s investing conglomerate now owns roughly 152 million shares of Occidental—a 16.3% stake worth nearly $8.5 billion that makes Berkshire by far and away the largest shareholder in the energy giant.

Shares of Occidental Petroleum failed to rally on the news Thursday, but it remains one of the best-performing stocks this year, rising over 90% thanks to the massive spike in oil prices that has occurred this year.

Though oil has spiked this year—reaching a high of nearly $140 per barrel ever since Russia’s invasion of Ukraine in late February, prices have moderated this month, with energy stocks paring back some of their momentous gains from earlier in 2022.

Oil continued to fall on Thursday: The price of U.S. benchmark West Texas Intermediate sits at nearly $105 per barrel (down from nearly $120 at the beginning of June), while international benchmark Brent crude trades at $110 per barrel.

Buffett is betting that the spike in oil and gas prices won’t end anytime soon and is using some of the recent declines as a buying opportunity amid analyst predictions that oil will remain well above $100 per barrel throughout the summer.

Key Background

The S&P 500 Energy sector has been the best-performing area of the market amid the brutal selloff so far this year, rising over 20% compared to the benchmark index’s more than 20% decline. While experts agree that energy companies have been “enjoying robust profits,” others predict that oil prices may have “peaked” and could moderate by next year.

Crucial Quote

“Oil volatility will remain elevated now that opposing opinions are emerging on where prices will finish the year,” predicts Edward Moya, senior market analyst at Oanda. Prices are “under pressure” amid global recession fears and high inflation, with “all the short-term drivers turning negative for the crude demand outlook.”

Tangent

Buffett’s other favorite energy stock is Chevron, shares of which are up more than 18% this year. With a massive stake worth around $26 billion, it is one of the billionaire investor’s top holdings after the likes of Apple and Bank of America.

Big Number: $92.1 Billion

That’s how much Buffett is worth, according to Forbes’ calculations. He is the ninth-richest person in the world.

What To Watch For

The latest move fuels additional speculation about whether Buffett could up his stake in Occidental to 20%—or go even further and try to buy the whole company.