Billionaire investor Warren Buffett (Trades, Portfolio) revealed on Tuesday his firm increased its stake in Occidental Petroleum Corp. (OXY, Financial) for the first time since September, buying $350 million worth of shares.
The legendary guru, who leads Omaha, Nebraska-based insurance conglomerate Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial), along with his two portfolio managers, Ted Weschler and Todd Combs, follows a long-term value investing approach that focuses on companies with understandable business models, favorable long-term prospects and competent management teams that are available at attractive prices.
According to GuruFocus Real-Time Picks, a premium feature based on 13D, 13G and Form 4 filings with the Securities and Exchange Commission, Buffett invested in another 5.8 million shares of the Houston-based energy company on March 3, 6 and 7. The share price ranged between $59.85 and $61.90.
He now holds 200.15 million shares in total, which account for 4.09% of the equity portfolio. GuruFocus estimates Buffett has gained 19.95% on the investment so far, which the 13F filing for the fourth quarter showed was his seventh-largest holding.
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Berkshire holds 22.24% of the oil company’s outstanding shares, up from 21.40% previously. In August, it received regulatory approval to purchase up to 50% of the stock, sparking debate that the conglomerate may buy the entire company.
The guru’s firm also owns $10 billion worth of Occidental’s preferred stock and has warrants to buy another 83.9 million common shares for $5 billion. The warrants were gained as part of its 2019 deal to help finance Occidental’s acquisition of Anadarko.
About Occidental
Founded in 1920, the exploration and production company has operations in the U.S., Canada, Latin America and the Middle East. Occidental is divided into four segments, with oil and gas making up the majority of its revenue at $27.2 billion in fiscal 2022.
Valuation
The stock had a stellar year in 2022, more than doubling in price to become the top performer in the S&P 500. It has retreated about 3% so far this year, however.
The oil and gas producer has a $56.73 billion market cap; its shares were trading around $63.03 on Wednesday with a price-earnings ratio of 4.97, a price-book ratio of 2.79 and a price-sales ratio of 1.69.
The GF Value Line suggests the stock is modestly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 76 out of 100, the GF Score indicates the company is likely to have average performance going forward. It received high ratings for momentum and profitability, but the financial strength and growth ranks were more moderate and the GF Value was low.
Earnings
Occidental disclosed its fourth-quarter and full-year 2022 financials on Feb. 27.
For the three months ended Dec. 31, the company posted revenue of $8.22 billion, which grew 4% year over year. Adjusted earnings of $1.61 per share declined 9% from the prior-year quarter.
As for the full year, Occidental recorded $36.63 billion in revenue and earnings per share of $9.36.
In a statement, President and CEO Vicki Hollub praised the company’s performance.
"Our fourth quarter of 2022 performance capped a year of strong results, in which we set operational records across our U.S. Onshore, Gulf of Mexico and International oil and gas businesses, while OxyChem delivered record earnings,” she said.
Dividend and share buybacks
During the quarter, Occidental completed its stock repurchase program, buying $562 million worth of shares. This brings the total number of repurchased shares for the year to 47.70 million.
It also announced a new $3 billion share repurchase program and increased its dividend by 38% to 18 cents per share.
Guru interest
Unsurprisingly, Buffett is by far the largest guru shareholder of Occidental.
Other gurus with large positions in the stock include Dodge & Cox, the Smead Value Fund (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Over the past year, the guru buys volume has outpaced the volume of sells.
Portfolio composition and performance
The majority of Berkshire’s $299.01 billion equity portfolio, which was composed of 50 stocks as of the end of the fourth quarter, was invested in the technology and financial services sectors.
Other stocks in the energy sector it held as of Dec. 31 were Chevron Corp. (CVX, Financial) and Vitesse Energy Inc. (VTS, Financial).
GuruFocus data shows Buffett’s firm returned 4% in 2021, outperforming the S&P 500’s return of -18.11%.
