Yahoo Finance Energy Comprises 9.9% of Buffett's Portfolio: 2 Stocks to Watch
The Oracle of Omaha and his team have demonstrated a strong preference for oil and energy stocks, as evidenced by the fact that 9.9% of Berkshire Hathaway's total portfolio value is invested in two major energy companies — Chevron Corporation CVX and Occidental Petroleum Corporation OXY. According to data from Stockcircle, Berkshire Hathaway's current total portfolio value stands at $361 billion.
This significant investment in energy stocks underscores the belief that the demand for fossil fuels will likely persist throughout this decade despite the rapid growth of investments in renewable energy and renewable fuels.
Investing in these two energy stocks likely reflects Buffett's strong preference for companies with robust balance sheets, a characteristic increasingly evident in Occidental Petroleum. Following the $55 billion acquisition of Anadarko in 2019, Occidental Petroleum saw a significant rise in its debt load. However, through disciplined spending and benefiting from sustained high oil prices, the company has managed to substantially reduce its debt burden.
2 Stocks to Keep an Eye on
Considering the backdrop, it would be wise to keep an eye on these two energy stocks, each carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron generates most of its earnings from its upstream operations. With a current holding value of $19.5 billion in this energy giant – per data from Stockcircle –, it’s apparent that Buffett and his team are likely bullish on oil prices and appreciate Chevron's position as one of the largest producers of oil and gas in the Permian Basin, the most prolific in the United States. In addition to maintaining disciplined capital spending, Chevron has a strong balance sheet, providing a solid foundation to rely on during unfavorable energy market conditions.
As an integrated energy player, Chevron also benefits from a diversified energy business, including downstream operations, which helps stabilize its earnings during periods of low oil prices. Currently, CVX is Berkshire’s fifth-biggest stock holding.
Recently, there was news that Warren Buffett has bought more shares of Occidental Petroleum for nine straight days, driving its stakes in the energy player to 29%. Currently, OXY ranks as the sixth-largest stock holding in Berkshire Hathaway's portfolio.
Crucially, Berkshire holds warrants that grant it the right to purchase an additional 83.9 million common shares of the energy company for $5 billion, with each share priced at $59.62. With the stock closing yesterday at $62.87 per share, Warren Buffett's warrants are now deemed "in the money."
To gain insight into Warren Buffett and his team's rationale for including this stock in their portfolio, one should consider their optimistic outlook on oil prices and the company's strong presence in the upstream sector. Occidental Petroleum is actively addressing its substantial debt burden, having reduced it from $47.6 billion in long-term debt as of the third quarter of 2019 to $18.5 billion by the first quarter of 2024.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
