continued to buy more shares of
in recent days, buying a total of about $580 million in shares on Wednesday, Thursday and Friday. That brought its stake in the major energy company to $9.9 billion, according to a filing released late Friday.
(Ticker BRK/A, BRK/B) now owns 163.4 million shares of
(OXY), a 17.4% stake, after buying a total of 9.9 million shares from Wednesday to Friday. Berkshire paid between $57 and $60 per share for its latest purchases. Shares of Occidental gained 2.7% to $60.44 on Friday.
Occidental has been the best performing stock in the S&P 500 so far this year by a wide margin with a 108% gain through Friday. Berkshire purchases contributed to this advance.
Berkshire CEO Warren Buffett started buying shares of Occidental earlier this year and has been rapidly increasing Berkshire’s stake since March.
Since mid-June, Berkshire has purchased about 20 million shares. Buffett seems to like buying Occidental stock at a price of $60 or less. Barron’s estimates that Berkshire’s total cost base for its stake in Occidental is about $53 per share, meaning Berkshire now has paper earnings of more than $1 billion.
As a holder of more than 10% of Occidental, Berkshire must disclose stock transactions within two business days via a filing with the Securities and Exchange Commission.
The new purchases could fuel speculation that Berkshire will further increase its stake to 20%, or potentially a bid for the entire company. At 20%, Berkshire would likely get a different accounting treatment for Occidental that would allow it to reflect a proportionate share of Occidental’s profits in its own results.
Berkshire also owns $10 billion of 8% dividend-paying Occidental preferred stock that it purchased in 2019 and it holds warrants to buy 83.9 million shares of Occidental common stock at a price exercise fee of $59.62. These mandates are now slightly in the money.
Occidental said on its May earnings conference call that it plans to launch a $3 billion share buyback program in the second quarter. Assuming this program is executed, Berkshire’s percentage ownership in the company will increase.
Occidental has focused on paying down debt associated with its 2019 purchase of Anadarko Petroleum. Debt has steadily declined in recent quarters due to strong earnings, and net debt stood at $23 billion at the end of the first quarter.
Buffett is in love with energy stocks. He was a big buyer of
(CVX) in the first quarter and now owns $23 billion of the energy giant.
Buffett may view energy stocks as inexpensive and a hedge against higher inflation. Even with the stock’s surge, Occidental is trading at less than six times expected 2022 earnings. Buffett likes corporate America and Occidental gets about 80% of its energy production from the domestic market.
Write to Andrew Bary at [email protected]