Here’s why Warren Buffet continues to buy energy stocks
Posted On March 25, 2022
As gas prices have reached record highs in recent weeks, drivers filling their gas tanks have had little reason to smile. On the other hand, investors in energy companies have enjoyed significant profits above their peers and have had little reason to cheer.
Finbold had previously reported on possible scenarios with oil prices and the effects it will have on consumers and investors alike.
There is another factor at play with oil prices and the performance of energy stocks, sanctions against Russia. Depending on the length of these sanctions the optimism fund managers and investors will have will also vary.
Energy stocks outperformance
The S&P energy sector has had an amazing performance compared to the beating the energy sector took in 2020. In 2021 energy gained 53% with this year’s performance hovering around 32% gain.
U.S. energy giants, Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), Occidental Petroleum (NYSE: OXY), and Conco Philips (NYSE: COP) have all ripped past the S&P500.
In 2022 these stocks have had a nice run-up with price spikes beginning on March 18th where OXY led the pack with a whopping 100% gain. XOM, CVX, and COP have also risen in this time period by 29%, 36.7%, and 39.9% respectively.
Oracle of Omaha strikes again
With the spike in oil prices, Warren Buffett (also known as the Oracle of Omaha) placed a large wager on the commodity and has been buying up a major oil firm. Buffett’s bet on OXY shares brought his ownership to a 14.6% stake in the company or $7.9 billion since February 29.
Inverse correlation of the market with energy stocks comes on the heels of the Russian invasion of Ukraine, as investors pile into energy stocks, and large oil producers ramp up production and investments.
Perennial investor dilemma
Investors would be well advised to keep their eye on the sector with such strong outperformance of energy stocks as compared to the rest of the market.
Warren Buffett has a good track record of being right, and his newest bet seems to be paying off handsomely. There is still room for some upside with the current geopolitical tensions for energy stocks so watching them closely will pay off in the end.