Berkshire has now poured about $11.1 billion into Occidental in just over 12 months, a Markets Insider analysis shows. Buffett’s interest helped propel the energy stock nearly 120% higher last year, making it the S&P 500’s best performer of 2022.
The 92-year-old billionaire resumed buying Occidental shares earlier this month after a five-month hiatus. The bargain hunter is likely pouncing because the stock has tumbled 26% from its November peak of $77, to $57 as of Wednesday’s close. Berkshire’s position is worth $11.8 billion at that price.
Occidental’s stock price has slumped 9% over the past five trading days alone, likely because Silvergate, Silicon Valley Bank, and Signature Bank have all folded in recent days, fueling concerns that other banks could follow. Buffett famously recommends investors “be greedy when others are fearful,” and appears to be taking his own advice.
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The Berkshire chief prizes Occidental’s domestic foothold and the fact it’s paying off debts, distributing dividends, and repurchasing shares, CEO Vicki Hollub has said. The spike in energy prices last year, fueled by the Russia-Ukraine war, has also inflated Occidental’s profits.
Buffett and his team won approval from regulators in August to increase their Occidental ownership to 50%, signaling they’re not done building their stake. They also piled around $20 billion into Chevron last year, securing a stake in the fossil-fuel giant worth $30 billion at the end of 2022. Those two bets indicate Berkshire is bullish on the energy sector.
On top of its 23.1% stake, Berkshire holds $10 billion of Occidental’s preferred stock, which generates $800 million in annual dividends. Moreover, it owns warrants it can exercise to buy around 84 million additional common shares at a fixed cost of $5 billion. Berkshire received both the preferred stock and warrants in return for financing Occidental’s takeover of Anadarko Petroleum in 2019.
Berkshire reported $258 million of Occidental’s after-tax earnings as its own last year, as it passed 20% ownership of the company in August and started accounting for its stake under the equity method.