Occidental Petroleum's stock rallies after Warren Buffett boosts stake by $216 million
By Tomi Kilgore
Support from Buffett and the stock's 'superior' risk-reward balance lead to upgrade from TD Cowen
A Form 4 filing with the Securities and Exchange Commission showed that Warren Buffett's Berkshire Hathaway Inc. (BRKA)(BRKA) has spent $216.2 million on Occidental shares over the past week, increasing its investment to about $13 billion.
Buffett's investment vehicle is by far Occidental's largest shareholder, with 23.5% of the common shares outstanding. The next biggest shareholder is Dodge & Cox, with 10.2% of the common shares outstanding, according to FactSet data.
Occidental's (OXY) stock climbed 3.1% in morning trading, enough to pace the Energy Select Sector SPDR exchange-traded fund's (XLE) gainers.
Berkshire's most recent purchases of Occidental included 1.88 million shares at a weighted average price of about $58.65 on March 23, and 1.79 million shares at a weighted average price of $59.32 on March 27.
Combined, Berkshire bought 3.67 million shares at a weighted average price of $58.975. At current stock prices, Buffett's newest investment has already increased in value by about $9.2 million.
The filing showed that Berkshire now owns 211.71 million common shares of Occidental, which at current prices are valued at about $13.02 billion.
It also owns 83.86 million warrants to purchase common stock at an exercise price of $59.624, along with 100,000 shares of Series A preferred stock.
Also providing a lift to Occidental shares, TD Cowen analyst David Deckelbaum raised his rating to outperform from market perform and increased his stock-price target to $70 from $63.
He listed a number of reasons for his newfound bullishness, including "superior" exposure to crude-oil pricing, capital structure shifts, a favorable free-cash-flow yield, well productivity and "captive buying support" from Berkshire Hathaway. .
Deckelbaum said for those reasons, he believes Occidental's stock presents a "superior" risk-reward balance.
"Asset and inventory quality is a key focal point for investors in a rangebound commodity tape where we see a superior profile for [Occidental], but also note ideal exposure to higher oil pricing in the event that macro views of an under-supplied situation in [the second half of 2023] emerge," Deckelbaum wrote in a note to clients.
Occidental's stock has slipped 1% over the past three months, while the Energy ETF has dropped 6.3%, crude-oil futures have shed 7.4% and the S&P 500 has gained 5%.
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March 28, 2023 11:47 ET (15:47 GMT)
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