Star investor Warren Buffett buys further stocks of oil company Occidental Petroleum on a large scale, increasing his stake to 27 percent. The announcement of the purchase was made in a disclosure to the US Securities and Exchange Commission (SEC), in which Buffett's company Berkshire Hathaway acquired approximately 10.5 million Occidental shares worth $588.7 million.
With this purchase, the star investor expanded his portfolio with further shares of one of his favorites in the stock market. Already in 2019, Buffett entered the oil company through his holding company and has since gradually increased his stake. In the third quarter of 2023, Occidental already accounted for the sixth-largest share in Buffett's portfolio, behind competitors Chevron, Coca-Cola, American Express, Bank of America, and tech giant Apple.
But the recent increase in Occidental stocks by Berkshire Hathaway could be more than just a strategic decision. The oil company is planning to acquire CrownRock, a smaller competitor, for the impressive amount of twelve billion US dollars. This step is apparently supported by Buffett, as he also stood behind Occidental during the first acquisition of Anadarko Petroleum in 2019, when he purchased unlimited preferred shares for ten billion US dollars and secured a guaranteed dividend.
However, the acquisition of Anadarko faced criticism from analysts and market experts, especially from Carl Icahn, who described the takeover as "massively overvalued" and saw the purchase as a poor business decision. Despite the concerns, Occidental is now pursuing a similar acquisition strategy with CrownRock, where the target company's debts are also expected to be assumed.
These acquisitions have resulted in Occidental's stocks currently being relatively cheap. In the last three months, the stock price fell by more than eleven percent, and since the beginning of the year by around six percent, while the broader US stock market significantly increased during the same period. However, Buffett continues to show faith in the oil sector and is betting on a recovery in the industry.
The rating agencies Fitch and Moody's have confirmed their investment-grade ratings for Occidental following the announcement of the acquisition plans, suggesting that the acquisitions may not be as risky as feared. Overall, it remains to be seen how the shares of the oil company will continue to develop and how Buffett's involvement in it will grow.
