Why Does Warren Buffett Favor Occidental Petroleum?

Addressing the shareholders over an earnings call on Saturday, April 30, Billionaire Warren Buffett disclosed that his conglomerate Berkshire Hathaway (NYSE: BRK.A) has significantly increased its stake in the oil sector with a whopping $7 billion invested in Occidental Petroleum (NYSE: OXY) during the first quarter of FY2022.

With the investment of about 18 million shares made last month, Berkshire Hathaway’s stake in Occidental Petroleum reached a whopping 14.6% of the outstanding total shares.

This is over and above the $10 billion holding of Berkshire in the preferred share capital of Occidental Petroleum.

No wonder that shares of Occidental Petroleum, the energy company, chemical manufacturer, and carbon management leader, have climbed more than 110% over the past year aided by surging oil prices.

Wall Street’s Take

Prior upbeat quarterly results in March, increased dividends, a new share buy-back program, as well as Buffet’s increasing exposure to the stock has led to numerous stock rating upgrades for OXY.

For instance, on April 29, the stock received an upgrade from a Hold to Buy at CFRA.

The rest of the Wall Street community, however, is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 10 Buys, seven Holds and one Sell. The average Occidental Petroleum price target of $69.47 implies a 26.1% upside potential to current levels.

Investors Weigh in

Following in Buffet’s footsteps, investors are increasingly buying OXY stock.

According to the TipRanks’ Stock Investors tool, investors currently have a Very Positive stance on Occidental Petroleum, with a whopping 13.1% of investors increasing their exposure to OXY stock over the past 30 days.

The Bottom Line

There’s a reason why the investor stalwart has spent a total of $41 billion on stocks during the first quarter, making the most of the current stock market sell-offs.

The oil and energy sector has been on top of Buffet’s shopping list, most recently increasing his investment to $25.9 billion by the end of March in Chevron (NYSE: CVX). This additional position taken has made it Berkshire Hathaway’s fourth-biggest equity holding by value.

Shares of Occidental have gained more than 100% over the last 12 months, particularly boosted from the recent spike in oil prices. The firm happened to have a negligible amount of exposure to Russian markets as well, making it more attractive than other susceptible players.

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