Occidental Petroleum Stock Is Down 32% – But Warren Buffett Keeps Buying More. Does He Know Something the Market Doesn't?

Warren Buffett's Berkshire Hathaway BRK BRK.B))  is at it again, buying up more shares of Occidental Petroleum OXY. On Feb. 7, Berkshire added 763,017 shares to its portfolio for about $35.7 million. 

That brings its total stake in the Houston-based oil and gas giant to 28.3%, making it Occidental's largest shareholder. According to Investors Business Daily, this follows a pattern—Berkshire has been steadily increasing its investment despite Occidental's stock taking a hit in recent months.

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The company's stock has had a rough ride, down nearly 32% from its peak in April. Last year alone, it dropped more than 17%, mostly due to weakening oil prices. 

Declining crude oil prices have put pressure on energy stocks across the board, and Occidental hasn't been an exception. Even so, Buffett doesn't seem worried.

This isn't the first time Berkshire has jumped in during a downturn. In December, it scooped up another 8.9 million shares when the market dipped. 

Berkshire's ties to Occidental run deeper than just common stock. It played a key role in Occidental's $55 billion purchase of Anadarko Petroleum in 2019, pumping in $10 billion in exchange for preferred stock. 

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That deal came with an 8% annual dividend, which means Berkshire is pocketing about $800 million a year just from those shares. On top of that, it holds warrants to buy another 80 million shares at an exercise price of $62.50. Investor's Business Daily said this gives Berkshire even more potential upside if Occidental's stock climbs.

Despite regulatory approval to buy up to 50% of Occidental, Buffett has made it clear he's not planning a takeover.

Business Insider reported that he first got interested in the company after reading a transcript of its earnings call and liking what he saw. That's been his approach for decades—digging into a company's fundamentals before making a move.

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Meanwhile, Occidental has been focused on paying down debt. By the end of Q3 2024, it had already knocked out $4 billion, reaching about 90% of its short-term debt reduction goal. As mentioned by Oxy, this is part of a broader strategy to shore up the company's financial position.

For investors, dividends are another draw. Occidental offers a 1.8% yield, making it an attractive choice for those looking for steady returns. The company is also making moves in carbon capture technology, which could position it well for the future as energy companies face increasing pressure to reduce emissions. This shift aligns with broader industry trends favoring sustainability.

Occidental's stock closed at $47.83 on Feb. 12, slipping 1.60% for the day. As Barron's noted, oil price fluctuations continue to impact the stock, but Berkshire's commitment suggests confidence in its long-term potential.

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