In 2019, Berkshire Hathaway chairman Warren Buffett invested $10 billion in Occidental Petroleum to finance its acquisition of Anadarko Petroleum. A year later, it looked that the Oracle of Omaha had made one of his worst investments as Occidental Petroleum stock crashed amid the steep fall in energy prices.
Briefly, WTI futures turned negative in 2020 as there were no buyers of oil amid the global lockdowns. Since then, global crude oil prices have been in an upwards spiral. Crude oil prices threatened to surpass $100 per barrel in 2021 only, even prior to the Russian invasion of Ukraine.
The war between Russia and Ukraine pushed global crude oil prices above $100 per barrel and they rose to their highest level since 2008. While oil prices have since come off their 2022 highs amid concerns over a global recession, they are still holding around the $100 per barrel price level. Oil and gas stocks like Occidental Petroleum are outperforming this year amid the rise in energy prices.
Meanwhile, Warren Buffett, who was a net seller of stocks in five consecutive quarters since the fourth quarter of 2020, poured billions of dollars into buying stocks in Q1 2022. He invested in Chevron and Occidental in the energy space. He also surprised markets by taking a stake in HP and Activision Blizzard.
While the Activision stake was seen as an arbitrage play ahead of its acquisition by Microsoft, the HP investment surprised markets as Buffett has generally stayed away from tech names. That said, the conglomerate is the second-largest Apple stockholder and Buffett bought $600 million worth of stocks in the first quarter of 2022. Buffett sees Apple as a consumer company and not a tech company.
Buffett Continues to Buy Occidental Petroleum shares
Usually, asset managers like Berkshire provide their portfolios on a quarterly basis within 45 days of a quarter’s end. However, since Berkshire’s stake in Occidental has surpassed 10%, the company needs to file its purchases with the SEC within two days. In its SEC filing, Berkshire said that it has purchased another 12 million Occidental Petroleum shares for $700 million. The conglomerate now holds an 18.7% stake in Occidental Petroleum.
Buffett’s bet on Occidental has paid off and the stock has more than doubled this year and is the top-performing S&P 500 stock. Netflix is the worst-performing S&P 500 stock this year as the stock plunged after both its Q4 2021 and Q1 2022 earnings. Tesla is also among the bottom 100 performing S&P 500 stocks this year.
Tesla’s CEO Elon Musk was looking to acquire Twitter but the deal is now reportedly in jeopardy as Musk and Twitter have sparred on the number of fake accounts on the microblogging platform. Twitter stock is crashing this morning on reports of the deal being in trouble.
Wall Street Analysts See Energy Stocks as Good Buys
Most Wall Street analysts are bullish on energy stocks. JPMorgan believes that energy stocks are a good bet amid the current macro environment. Goldman Sachs also released its list of buy-rated oil and gas stocks.
However, some brokerages have a bearish view of oil. Citi believes that oil prices would fall to $85 per barrel by the end of 2022. In its bear case scenario of a recession, it expects oil at $65 per barrel in 2022 and $45 per barrel in 2023. JPMorgan on the other hand sees crude oil prices rising to $380 per barrel in the worst-case scenario of cuts from Russia.
Coming back to Occidental Petroleum, the stock has a 52-week trading range of $21.62-$74.04. It was trading higher in premarkets today as oil and gas stocks look to recoup their recent losses amid the strengthening crude oil prices. While oil prices had briefly dipped below $100 per barrel earlier this week on recession fears, they have since rebounded above $100.
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