Warren Buffett and his partner Charlie Munger are two of the most successful investors in history. The cornerstone of their investment strategy is focusing on companies with a “moat.”
A moat is a competitive advantage that allows a company to maintain its market share and profitability over time. For example, Coca-Cola has a moat from its strong brand name and global distribution network, making it difficult for new entrants to compete with Coke in the beverage market.
In addition, Buffett also takes a long-term approach to investing. He knows that patience is vital when it comes to building wealth. He’s not looking to make a quick buck; he’s looking to build a lasting, sustainable fortune.
Finally, Buffett isn’t afraid to be contrarian. And one of the largest contrarian bets he’s made in recent years has been in energy stocks when they were out of favor. He’s also been snapping up shares of his own firm, but why?
Buying Back Shares Of Berkshire Hathaway
Berkshire Hathaway is a holding company that owns various businesses, including GEICO, BNSF Railway, and Dairy Queen. It is also one of the most successful companies in the world, with a market capitalization of over $636 billion.
For Buffett and Munger, investing in their own company reflects their confidence in its long-term prospects.
As an outside investor, there are many reasons to like Berkshire Hathaway. Here are three of them:
- Diversification: By owning more than 65 businesses in various industries, investors are less likely to experience significant losses if one particular sector suffers setbacks. For example, if the housing market were to experience another downturn, investors in Berkshire Hathaway would still be protected because the company has interests in other industries, such as insurance and utility companies.
- Consistent earnings growth: The company’s consistent earnings growth history is another reason to consider buying Berkshire Hathaway stock. Berkshire Hathaway has increased its per-share book value at an annual compound rate of 20.1% since 1965. Berkshire Hathaway’s per-share market value has increased by 3.6 million percent since Buffett began managing it. If you had invested $10,000 in Berkshire Hathaway stock in 1965, your investment would be worth around $180,000,000. That’s the power of compounding returns.
- Experienced Management: Another reason to consider buying Berkshire Hathaway stock is the experienced management team that Warren Buffett has put in place. Buffett has been at the helm for over 50 years and has successfully steered the company through various market cycles. In addition, Buffett has surrounded himself with experienced managers such as Ajit Jain and Greg Abel, who are tasked with running the day-to-day operations of the various businesses.
Buffett Buying Up Occidental Petroleum?
Occidental Petroleum Corporation is an American multinational oil and gas exploration and production company with operations in the United States, Africa, the Middle East, and Latin America. The company is headquartered in Houston, Texas.
Occidental Petroleum has been in business since 1920 and is one of the oldest oil companies in the world. The company has a long history of success and has weathered many storms, including the oil crisis of the 1970s and the Gulf War of the 1990s.
Today, Occidental Petroleum is once again poised for success. Here are three reasons why Occidental Petroleum may seem like an attractive investment for Warren Buffett:
- OXY has a much stronger balance sheet: Occidental Petroleum has a market capitalization of $67.5 billion and aims to bring down the total debt to $15 billion. This is a manageable level of debt, especially considering that the company had a record-high quarterly free cash flow amount of $4.2 billion before working capital. In addition, OXY has access to $4 billion in revolving credit facilities. This means that the company should have no trouble covering its short-term obligations and continuing to invest in its business.
- OXY is a leader in the energy transition: Occidental Petroleum has made significant progress on its goal to achieve net-zero emissions by 2050. In addition, OXY plans to invest $1 billion in a facility that will remove carbon dioxide from the atmosphere. This makes it one of the leading companies in the energy transition and gives it a competitive advantage as the world moves away from fossil fuels.
- Diversified Business Model: Occidental Petroleum has a diversified business model with operations in three different segments: oil & gas (exploration & production), midstream & marketing (transportation & storage), and chemicals (manufacturing). This diversification reduces risk because if one segment encounters difficulties, the other can offset those losses.
Warren Buffett is one of the most successful investors in history. When Buffett buys a stock, it pays to take notice. While it’s not possible to know exactly what stocks Buffett is buying at any given time, we can make educated guesses based on his past investment behavior. Given his investing track record, Berkshire Hathaway and Occidental Petroleum are two stocks Buffett is likely buying now.