Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) continues to build its stake in oil and gas giant Occidental Petroleum (NYSE:OXY). Between March 23 and 27, Berkshire bought over 3.66 million additional OXY shares for $216 million. With this most recent transaction, Berkshire now has a 23.6% stake in Occidental, per Reuters.
Berkshire’s Rising Stake in Occidental
Berkshire bought about 7.9 million shares of Occidental in multiple transactions between March 13 and March 15 for an aggregate amount of over $466 million. Earlier this month, it purchased 5.8 million OXY shares for over $354 million.
Berkshire now owns about 211.7 million OXY shares worth $12.6 billion, based on the closing price of $59.65 on Monday. It also owns $10 billion of Occidental preferred stock with an 8% dividend and warrants to buy another $5 billion of common shares at $59.62 apiece.
Berkshire has emerged as the largest shareholder of Occidental. Many analysts speculate that it might eventually buy the energy company. Occidental was the best-performing stock of 2022. It rallied 119% last year, thanks to the growing interest of ace investor Warren Buffett and a strong energy market that benefited from high prices due to the Russia-Ukraine war.
This year, OXY shares are down 5.3%, as investors are concerned that a potential recession may weigh on oil demand. Last month, Occidental reported a 9% year-over-year rise in adjusted EPS to $1.61 but lagged analysts’ expectations. The company announced a new $3 billion share buyback program and increased its quarterly dividend by 38% to $0.18.
Is Occidental Petroleum Stock a Good Buy?
Today, TD Cowen analyst David Deckelbaum upgraded Occidental Petroleum to Buy from Hold and raised the price target to $70 from $63.
Reasons cited by the analyst for his bullish stance were “superior risk-reward balance of superior exposure to crude pricing, capital structure shifts, captive buying support from Berkshire Hathaway, a favorable free cash yield, well productivity and a differentiated catalyst rich profile in a world of relatively homogeneity across E&Ps.”
Wall Street is cautiously optimistic about Occidental Petroleum, with a Moderate Buy consensus rating based on nine Buys, four Holds, and one Sell. The average price target of $73 suggests 22.4% upside.
