Reuters/Shannon Stapleton
- Warren Buffett's Berkshire Hathaway has resumed buying Occidental Petroleum's stock after a five-month break.
- Buffett's company spent $355 million in three days, raising its stake in the energy giant to 22.2%.
- Occidental's stock soared nearly 120% last year, making it the S&P 500's best performer of 2022.
Warren Buffett's Berkshire Hathaway has resumed buying Occidental Petroleum shares after a five-month hiatus, signaling the famed bargain hunter once again views the oil-and-gas giant's stock as undervalued.
Buffett's company scooped up 5.8 million Occidental shares during the past three trading days, boosting its stake to 200 million shares or 22.2%, a Securities and Exchange Commission filing on Tuesday revealed. Its last purchase was in late September.
Berkshire paid about $355 million for the new shares, lifting its spending on Occidental stock to around $11 billion in just over a year. The conglomerate's stake is worth over $12 billion, based on Occidental's closing price of $60.85 on Tuesday.
Occidental's stock price surged by nearly 120% last year, making it the S&P 500's top performer of 2022. It was virtually flat year-to-date as of Tuesday's close, but climbed about 3% in pre-market trading on Wednesday — likely on the news of Berkshire's latest purchases.
Buffett values Occidental's domestic strength and the fact it's cutting its debt pile, paying dividends, and buying back shares, CEO Vicki Hollub has said. The surge in energy prices last year, sparked by the Russia-Ukraine war, has also buoyed Occidental's profits.
Berkshire secured regulatory approval in August to own up to 50% of Occidental, indicating it wasn't done building its stake. It also poured roughly $20 billion into Chevron last year, and counted the energy titan among its top five holdings on December 31. The two massive bets suggest Buffett and his team are finding value in the fossil-fuel sector.
In addition to its 22.2% stake in Occidental, Berkshire holds $10 billion of the company's preferred stock, which yields $800 million of yearly dividends. It also owns warrants it can exercise to buy about 84 million common shares at a fixed cost of $5 billion. It received both the preferred stock and warrants in return for financing Occidental's takeover of Anadarko Petroleum in 2019.
Buffett's company included $258 million of Occidental's after-tax earnings in its reported income last year. It started accounting for its stake using the equity method after clearing 20% ownership in August.