Why Warren Buffett Keeps Buying OXY, Even as the Stock Sinks
Occidental Petroleum (OXY) is not just another oil company. It’s a heavyweight in fossil fuel production, chemicals, and carbon capture technology. Warren Buffett, the legendary investor behind Berkshire Hathaway (BRK.A) (BRK.B), has a knack for spotting businesses with strong cash flow, competitive advantages, and long-term growth potential. When Buffett sees value, he goes all in – and that’s precisely what he’s been doing with Occidental.
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Reinforcing Its Position
Over the past two years, Berkshire Hathaway has steadily increased its stake in Occidental. Today, it owns over 28% of the company, with warrants to buy even more shares. This aggressive buying spree has continued even as OXY’s stock price has slumped down about 15% in the last year. Most investors would shy away from a stock that’s losing ground, but Buffett? He doubles down.
This move is even more intriguing because it coincides with Berkshire’s decision to sell off half its Apple shares, a rare Buffett misstep. Apple’s stock has since soared, meaning Berkshire left billions on the table. Meanwhile, Occidental’s shares have continued to slide, making some wonder why Buffett remains so committed.
Why Then?
The answer lies in Buffett’s belief in the long-term strength of oil and energy. Even as the world shifts toward renewables, Buffett knows fossil fuels still play a crucial role, and he sees OXY as a well-run, cash-generating machine. More importantly, Occidental is at the forefront of carbon capture technology, an area that could make it a key player in the energy transition. Government incentives and tax credits for carbon reduction add even more appeal.
Buffett also loves companies that pay down debt and generate strong cash flow, and Occidental has been doing just that since its costly 2019 Anadarko acquisition. Despite short-term struggles, the company remains fundamentally strong.
In the end, Buffett isn’t worried about where OXY’s stock is today – he’s betting on where it will be in five or ten years. If history is any guide, when Buffett bets big, it’s usually for a good reason. Occidental’s Q4 2024 earnings report is scheduled for next week on the 18th. Then, we’ll see if the short-term looks promising as well.
Is OXY a Buy or a Sell?
Turning to Wall Street, Occidental is considered a Hold. The average price target for OXY stock is $60.23, implying a 23.25% upside potential.