Warren Buffett Can’t Stop Buying Occidental Petroleum Stock

Legendary Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett can’t seem to stop buying more and more shares of oil and gas major Occidental Petroleum (NYSE:OXY). Is this a prediction or just an addiction?

It might be tempting to buy OXY stock just because Buffett is doing it. Still, I encourage you to think for yourself and think about it. why The Oracle of Omaha would very strongly favor Occidental Petroleum.

It may be worth considering whether there is currently an attractive value proposition for Occidental Petroleum stock. But a closer look at the latest news will also reveal that Berkshire and Occidental are collaborating to unlock vital clean energy elements.

warren buffett really I like OXY stock

Unfortunately, Buffett doesn’t typically announce his company’s investments in real time. But through legally required filings, even mere mortals can get a glimpse into this investment expert’s holdings.

For example, data shows that Berkshire Hathaway recently purchased 2.6 million shares of OXY stock, for a total value of over $150 million at the time. If that sounds like a lot of stock, it’s actually just another addition to Buffett’s holdings, as Berkshire currently owns a whopping 250.6 million shares of Occidental Petroleum.

Following its recent acquisition, Berkshire Hathaway now holds a 28% stake in Occidental Petroleum. You may have heard that Berkshire is acquiring Occidental Petroleum outright. However, no concrete evidence was found that Buffett was planning to buy Occidental.

The required filings typically do not reveal why a company like Berkshire Hathaway is purchasing stock in a particular company. So retail investors can only guess why Buffett is so bullish on Occidental Petroleum.

But there may be some clues. Buffett is known as a value investor who likes to buy his favorite stocks when they are falling. In the case of OXY stock, Berkshire Hathaway is known to purchase more shares whenever they are below $60 per share.

It’s not just a coincidence, then, that Berkshire paid less than $60 per share for 2.6 million shares of OXY stock. Since Buffett’s company tends to place bottoms through large purchases, I admit I’m tempted to buy Occidental Petroleum stock whenever it hits that price.

As of Friday, Occidental Petroleum stock closed at $59.48, so it might not be a terrible idea to grab a few shares like Buffett does. Occidental Petroleum’s trailing 12-month price-to-earnings (P/E) ratio of 17.19 also suggests that the company is not very valuable.

For Occidental Petroleum itself, it’s a positive sign that first-quarter adjusted earnings of 63 cents per share beat analysts’ consensus estimate of 58 cents per share.

The company also offers an annual dividend yield of 1.48%, and there’s no doubt that Buffett likes to receive quarterly cash distributions.

A Surprising Reason Why Buffett Loves Occidental Petroleum

That’s not the only reason Buffett likes Occidental Petroleum so much. The strategic partnership we’re working on is probably one you didn’t expect.

Berkshire Hathaway Energy subsidiary BHE Renewables has entered into a joint venture with Occidental Petroleum, according to a recent press release. Through this partnership, TerraLithium, a subsidiary of Occidental Petroleum, will extract and produce lithium compounds.

Please be assured that this is not BHE Renewables’ first time entering the lithium market. The company currently “operates 10 geothermal power plants in California’s Imperial Valley,” which “process 50,000 gallons of lithium-rich brine per minute to produce 345 megawatts of clean energy.”

Most retail investors have probably never thought of Berkshire Hathaway and Occidental Petroleum as lithium producers. But clearly these two companies are committed to jointly developing their lithium business, especially in California.

Suddenly, Buffett’s strong interest in Occidental Petroleum made more sense. Berkshire is not simply a shareholder of Occidental. The two companies are indeed working closely together on a high-confidence joint venture.

So if you’re going to invest in Berkshire Hathaway or Occidental Petroleum, you definitely want to be bullish on lithium. It is used in electric vehicle batteries, so ironically, OXY stock can be considered a clean energy investment, even though Occidental Petroleum is an oil and gas producer.

Of course, belief in lithium isn’t the main reason people are buying Occidental Petroleum stock today. Investors often buy Buffett’s stock just because he likes the company so much.

That may not be the ideal reason to buy a particular stock, but at least you’ll be riding with a financial whale who sees deep value when he sees it.