Warren Buffett, CEO of Berkshire Hathaway.
Johannes Eisele/AFP/Getty Images
Berkshire Hathaway
owns a 9.8% stake in
Occidental Petroleum
worth $5.1 billion after furious buying activity in shares of the big energy company this past week.
Berkshire Hathaway (ticker: BRK.A and BRK.A) disclosed late Friday in a form 4 filing with the Securities and Exchange Commission that it held 91.2 million shares of Occidental Petroleum (OXY), up from 29.8 million shares on Tuesday, which was disclosed in a separate 13-G SEC filing on Friday.
On Friday, Barron’s reported the Berkshire holding of 29.8 million shares, but not the full holding of 91.2 million reported that day in a separate filing.
From Wednesday through Friday, Berkshire bought more than 60 million shares of Occidental, fueling a surge in the energy company’s share price. The biggest daily gain occurred Friday, when Occidental surged 17.6%, or $8.40, to $56.15. That was the date of Berkshire’s heaviest buying.
Berkshire bought 34 million shares of Occidental on Friday at prices ranging from $48 to $56 as volume spiked to 100 million shares, against more recent daily volume in the 15 to 20 million share range.
The purchases were probably made in large part by CEO Warren Buffett who oversees Berkshire’s $350 billion equity portfolio. Buffett’s two investment lieutenants, Todd Combs and Ted Weschler, run a combined $34 billion for Berkshire. While the two may have been involved, they would probably not have taken on such a large holding by themselves.
The big purchases of Occidental stock late in the week are uncharacteristic of Berkshire, which normally accumulates stock in companies relatively quietly over time.
The huge buying of Occidental underscores Buffett’s enthusiasm for the company. Berkshire already owns $10 billion of 8% preferred stock and about 84 million warrants to purchase Occidental stock at $59.62 a share.
“Buffett and Combs and Weschler require a large margin of safety,” Bill Smead, manager of the Smead Value fund, wrote in an email to Barron’s. “They must have concluded that OXY has that safety around $46 to $55 per share, with oil above $90 per barrel.” The Smead fund holds Occidental stock.
Once Berkshire hit the 10% stake in Occidental on Tuesday, subsequent changes in its holdings had to be reported promptly.
Berkshire bought the Occidental preferred in 2019, when Occidental CEO Vicki Holub wanted to quickly arrange financing to win a bidding war for Anadarko Petroleum against the deeper-pocketed
Chevron
(CVX). Berkshire got the warrants as an equity kicker for buying the preferred, which carries a lush dividend.
The Anadarko deal saddled Occidental with enormous debt that nearly sank the company in 2020 when oil prices collapsed. But the company has come roaring back from under $10 a share as oil and gas prices have surged. The company recently boosted its dividend to 52 cents annually a share from 4 cents and said it plans to continue to reduce debt, which stood at about $30 billion at year-end 2021.
Write to Andrew Bary at andrew.bary@barrons.com
