The Oracle of Omaha increased his stake in oil and gas company Occidental Petroleum in July, buying an additional 12 million shares for $698 million, according to Securities and Exchange Commission (SEC) filings.
Warren Buffett’s Berkshire Hathaway now owns 18.7% of the common stock, according to S&P Global, making Berkshire Hathaway the single largest shareholder.
Earlier this month, Buffett had bought 9.9 million shares of Occidental Petroleum, per SEC filings. This recent buying spree is making some analysts wonder whether Buffett is aiming at a full ownership of the company, S&P Global detailed.
The shares are up a whopping 82% year-to-date, but were down 3.5% as of midday on July 12.
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Cathy Seifert, vice president at CFRA Research, told GOBankingRates that, “The ‘TBD’ portion of all this is whether Berkshire is doing what most astute investors would do amid rising energy prices and increase their weighting in the energy sector — or do they intend to acquire enough of OXY to consolidate it on their financials?”
She added that, “The other little wrinkle in all of this is Berkshire has warrants to buy 83.9M OXY shares at $59.62 that were out of the money for most of the last year… and now thanks to Berkshire’s purchases of OXY the stock has risen and the warrants are now in the money.”
“It’s important to remember that Berkshire has a long-term time horizon and the benefit of already owning a series of Preferred OXY shares and the warrants. At this juncture the energy trade may be a little late in the cycle,” she concluded.
Goldman Sachs Downgrades Occidental Petroleum
In addition, Forbes reports that Goldman Sachs downgraded shares of Occidental Petroleum on July 11 — to neutral from a buy opinion, with a $70 price target for the stock — which would represent an approximate 15% upside from current levels.
“While we continue to see an attractive free cash flow outlook, Occidental Petroleum’s valuation looks less attractive, especially relative to other energy companies and after the stock’s massive runup,” wrote Goldman Sachs analyst Neil Mehta, according to Forbes.
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