Buffett bets on Occidental: A look at the development

Super-investor Warren Buffett, renowned for his adeptness in the stock market, has once again demonstrated his affection for the energy company Occidental Petroleum. Berkshire Hathaway, the company led by Buffett, holds over 40 stock positions valued at nearly 300 billion dollars. This represents about one-third of Berkshire's market capitalization, which amounts to 984 billion dollars. In the first half of this year, Berkshire Hathaway achieved a total of 20 billion dollars in both realized and unrealized gains from its stock holdings. Buffett recommends ignoring the unrealized gains and losses, which amount to 37.9 billion dollars, as their impact on the company is uncertain. Since 2019, Berkshire has been invested in Occidental Petroleum, supporting the 38 billion dollar acquisition of Anadarko Petroleum. Buffett praises Occidental's management, particularly CEO Vicki Hollub, and their innovative CO2 recovery strategies. Occidental and Berkshire have launched a joint project for lithium extraction in California. Over the past five years, Occidental's stock price has moved in concert with oil prices. After a notable rise from October 2020 to November 2022, the price stalled. In the last six months, the stock experienced a 21 percent decline, most recently trading at 51.30 dollars per share. In light of falling oil prices, several analyst firms have lowered their forecasts for Occidental. Morgan Stanley reduced its price target from 74 to 71 dollars, yet maintained an overweight rating. Analysts cite stagnant inflation, declining oil prices, and interest rate cuts by the Federal Reserve as key challenges. Evercore ISI and Truist followed with similar adjustments: Truist lowered its target from 65 to 56 dollars, while Evercore revised its target from 67 to 63 dollars, yet continued to maintain an underperform rating. Evercore also points to possible production cuts by Russia, which could pose risks of rising oil prices. Despite these potential risks, Evercore expects a decline in oil price forecasts by the end of the third quarter. Departing from these cautious assessments, Morningstar analyst Joshua Aguilar raised his fair value estimate for Occidental stock by 7 percent to 62 dollars on September 3. He cited potential savings of up to 400 million dollars annually from reduced crude oil and transport tariffs as reasons for his optimism.