Buffett's company, Berkshire bought another $409 million worth of Occidental Petroleum stock (~8.9 million shares) in December. Its last purchased OXY in June 2024. Berkshire now owns ~264 million shares which are 28.4% of outstanding shares.
| Date Filed | Reporting Name | Relationship | Trans. Date | Shares | Price $ | Total Value $ |
| 19-Dec-24 | BERKSHIRE HATHAWAY INC | 10% | 19-Dec-24 | 3,372,309 | 45.55 | 153,594,511 |
| 19-Dec-24 | BERKSHIRE HATHAWAY INC | 10% | 19-Dec-24 | 241,706 | 46.31 | 11,193,115 |
| 19-Dec-24 | BERKSHIRE HATHAWAY INC | 10% | 18-Dec-24 | 374,589 | 46.92 | 17,574,667 |
| 19-Dec-24 | BERKSHIRE HATHAWAY INC | 10% | 18-Dec-24 | 2,430,924 | 46.16 | 112,202,457 |
| 19-Dec-24 | BERKSHIRE HATHAWAY INC | 10% | 17-Dec-24 | 2,477,362 | 46.25 | 114,588,397 |
| Subtotal | 8,896,890 | 409,153,147 |
I beleive Warren Buffett (Trades, Portfolio) continues to invest heavily in Occidental Petroleum (OXY, Financial) for several key reasons:
Strong Fundamentals and Cash Flow
Buffett appreciates Occidental's focus on profitability and sustainable cash flows. The company has been prioritizing profits over production, which aligns with Buffett's investment philosophy. Occidental's management has set clear objectives for its free cash flow, including debt reduction, dividend payments, and share buybacks.
Geopolitical Moat and Stable Oil Supply
Buffett likely sees Occidental's wide geopolitical moat as a significant advantage, leading to a stable oil supply from the Permian Basin. It's a hedge against instability in the middle east. The company has forecasted oil prices to remain between $80 to $85 into 2025, which should contribute to steady returns.
Attractive Returns and Dividends
Berkshire Hathaway has been receiving substantial cash returns from its Occidental investment. Through the third quarter of 2023, Occidental redeemed approximately $1.5 billion in Berkshire-owned preferred shares and paid out around $4 per common share in dividends. This translates to a significant cash yield for Buffett's firm.
Long-Term Energy Outlook
Despite the push for renewable energy, Buffett seems to believe that society's dependence on oil will continue for many years to come. The recent slowdown in the transition to renewable energy and electric vehicles may have reinforced this view.
Potential for Acquisition or Consolidation
Some speculate that Buffett's increasing stake in Occidental could position the company as an acquisition target in the future, especially given the recent consolidations in the oil and gas industry. A merger with a super-major like Exxon (XOM) of Chevron (CVX) may be an end-game in Buffett's mind.
Production Growth and Efficiency
Occidental has consistently surpassed its production guidance, demonstrating strong growth potential. This efficiency and ability to exceed expectations likely appeals to Buffett's investment strategy.
In conclusion, Buffett's continued investment in Occidental Petroleum reflects his confidence in the company's management, its strong cash flow generation, and its potential for long-term value in the energy sector.
Conclusion
Warren Buffett (Trades, Portfolio) continues to invest heavily in Occidental Petroleum due to several compelling factors. He appreciates the company's strong fundamentals and focus on its sustainable cash flows and commitment to prioritizing profits over production. Occidental's wide geopolitical moat, especially its stable oil supply from the Permian Basin, adds to its appeal, as the company forecasts oil prices to remain favorable in the coming years. Additionally, Buffett benefits from attractive returns and dividends, with substantial cash returns from his investment. He likely believes that, despite the push for renewable energy, dependence on oil will persist for many years. Furthermore, Buffett's increasing stake may position Occidental as a potential acquisition target in a consolidating industry. The company's consistent ability to exceed production guidance demonstrates strong growth potential that aligns well with Buffett's long-term investment strategy.
