Occidental Petroleum (OXY) is one of the energy industry’s earliest oil and natural gas companies. Its stock has tumbled for the past year for various reasons, from geopolitical tensions in the Middle East and the Russia—Ukraine war to a steep decline in natural gas prices. The stock has decreased from its highs of over $65 per share in October 2023 to $53.95 today. Despite this volatile behavior, Warren Buffet’s Berkshire Hathaway continues to expand its stakes in the company, most recently reaching 27.25% of the company’s shares. It leaves Wall Street investors wondering what Berkshire’s underlying strategy is for the long term. Nevertheless, these actions speak for themselves, so let’s try and break them down.
If you would like to read more extensively about Occidental’s current challenges, you can see what our writer at Tipranks, Nikolaos Sismanis, had to say about it right here.
Now, let’s explore three talking points as to why Berkshire Hathaway is so keen on OXY stock:
- Long-Term Confidence: Clearly, Warren Buffet’s perspective on Occidental’s prospects is extremely positive. He clearly realizes that geopolitical tensions are part of the energy industry’s cycle of operation. Moreover, injecting funds into the operation during times of hardship makes an even better impression on investors, enhancing their confidence in the company and its stock.
- Strong Production and Growth Potential: Occidental has continually surpassed its production guidance, showing great growth potential. For example, OXY’s guidance for the second quarter of 2024 was between 1.23 million and 1.27 million barrels per day, surpassed by 6000 barrels per day. In addition, OXY’s investments in carbon dioxide will help it increase its oil production and meet green energy standards, ensuring consistent revenues.
- Attractive Valuation: The company’s valuation appears attractive despite challenges in oil and gas prices and rising operational costs. It trades at an appealing low multiple of 13.5, which offers a smooth entry point for long-term investors, which Berkshire Hathaway clearly is. Another key factor in Berkshire’s enthusiasm for OXY is its positive EPS, which exceeded expectations for four quarters in a row. Analysts predict a big jump in Fiscal 2025, allowing the stock to reach $4.25 per share.
What Is OXY’s Price Target?
On Wall Street, Occidental Petroleum is a Moderate Buy, with 6 Buys, 12 Holds, and 1 Sell. The average price target for OXY stock is $67.35, reflecting 25.09% upside.
Takeaway
Occidental Petroleum’s stock hasn’t been outstanding this last year, dropping 15% since mid-October 2023. The stock volatility can be attributed to various reasons, such as geopolitical tensions and a decline in oil and gas prices. However, Warren Buffet’s Berkshire Hathaway has continued to buy shares and increase its stakes in the company, which has raised some eyebrows around Wall Street. When examining the company’s operations and longevity, it’s clear as a day that the company has great prospects and room to grow. Although Buffet’s nickname as the “Oracle” relates to prophecy, it doesn’t take a medium to foresee OXY’s prospects.
