Berkshire Hathaway Buys More Occidental, Firms Urge You To Follow Suit

Investors should follow Warren Buffett's lead by investing in Occidental Petroleum, according to Wall Street firm TD Cowen, which is also betting that Buffett will continue to buy up the company.

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It was disclosed that Berkshire Hathaway purchased 3.2 million additional shares of Houston-based energy producer Occidental Energy for $216 million on Monday and last Thursday, increasing the conglomerate's stake in the energy company to 23.5%, according to a new regulatory filing released by the company.

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In the past few weeks, the legendary investor has added to his already large stake in the U.S. regional bank as oil prices have fallen and concerns about the health of U.S. regional banks have grown. He made this addition on March 13-15 while also adding 5.1 million shares on March 3-7.

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On Tuesday, TD Cowen upgraded Occidental Investments from market performance to outperform following the news of Berkshire Hathaway's acquisition of the stock. In addition to Occidental's strong fundamentals, the Wall Street brokerage noted that Berkshire Hathaway's "captive buying support" of the stock contributes to Occidental's earnings growth.

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It appears that Berkshire's buying is not slowing down, according to TD Cowen. There is a strong risk-reward balance between the company and its assets. It has a favorable free cash yield, high good productivity, a differentiated catalyst-rich profile, and good exposure to crude prices. Berkshire Hathaway's captive buying support, a favorable free cash yield, and a strong capital structure shift.

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According to the regulatory approval Berkshire received in August, the company has the option of purchasing up to 50% of the company. Berkshire owns Occidental preferred stock to the tune of $10 billion and has warrants to buy another 83.9 million shares of Occidental common stock for $5 billion, or $59.62 per share. The warrants were acquired when Occidental purchased Anadarko Petroleum in a deal that helped finance the company's acquisition of the company in 2019.

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Berkshire Hathaway's top ten most valuable holdings now include Occidental Petroleum. Despite a banner performance in 2022, when the company was the best performer within the S&P 500, it lost about 5% of its value this year following a breakthrough year.

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There was an increase of about 2% in the stock price pre-market on Tuesday.