These are good times to be an Occidental Petroleum (OXY) investor.
The oil-and-gas producer recently dialed in a much better-than-anticipated earnings report, raised its quarterly dividend from $0.01 to $0.13, and announced a new share buy-back program. And the company is also flushed with cash which it is now using to pay off its debt.
But those are not the only reasons why, in sharp contrast to most equities, shares are up by 91% year-to-date.
The biggest driver for the recent outsized gains is fairly obvious. Oil prices have gone through the roof, as the world mulls over a prospective supply shock following Russia’s invasion of Ukraine. Western sanctions could close the tap on Russian oil supplies to global markets. Meanwhile, Occidental’s lack of Russian exposure has also helped its case here.
With all this acting as backdrop, some of the world’s most renowned investors have been sending conflicting signals regarding their Occidental strategy.
According to a Wall Street Journal report, Carl Icahn has now completely sold his remaining holdings in the company. Icahn, who once held around a 10% stake, had already been trimming his position, and has now offloaded the rest while the stock has been soaring. Sources “familiar with the matter” claim the activist investor has made around $1 billion from his Occidental investment.
Icahn’s exit brings to an end an uneasy relationship; he was not happy, when in 2019, Occidental outbid Chevron to acquire Anadarko Petroleum, in a deal worth $38 billion.
When OXY shares took a severe beating at the height of the corona crisis of March 2020, Icahn backed up the truck, loaded up on shares, and increased his stake in the company from 2.5% to roughly 10%. By that point, Icahn was calling for the removal of CEO Vicki Hollub, and still asserting the company had made a wrong move with the Anadarko deal.
Further displeasing Icahn, to pay for the acquisition, Warren Buffett chimed in with $10 billion.
Which brings us nicely to the Oracle of Omaha. In contrast to Icahn, Buffett has been loading up on OXY shares.
Buffett might have complained in his recent annual letter to shareholders that there is little to get excited about right now in the equity markets, but the actions at Berkshire Hathaway indicate Buffett or one of his portfolio managers, might think otherwise.
A new SEC filing from last Friday shows the company bought over 61 million OXY shares last week, in the price range between $47.07 and $56.45. That brings Berkshire’s total holding to 91.2 million common shares – or a 9.8% stake – equating to around $5.1 billion as of Friday.
What does this mean? In all likelihood, it indicates that Buffett thinks oil prices will go higher, which could suggest the fabled investor believes the West will soon ramp up its sanctions by boycotting Russian oil entirely.
Buffett might be buying, but most Wall Street analysts think the shares have run enough for now; the $45.73 average target suggests the stock is in line for a 17% pullback over the coming months.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
