The famed investor’s company spent about $391 million on the latest batch of shares, lifting its total investment in the oil-and-gas explorer and producer this year to well over $9 billion.
Now that Berkshire has reached the 20% ownership mark, it has the option to report a proportional share of Occidental’s profits as its own under the equity method of accounting, as it does with Kraft Heinz and Pilot Travel Centers. On the other hand, it may treat the position as a passive holding, as it does with its over 20% stake in American Express, and not alter its accounting.
Occidental shares closed at $60.04 on Monday, valuing Berkshire’s enlarged stake at $11.3 billion. The company’s stock price has surged more than 90% this year, fueled by the surge in energy prices following Russia’s invasion of Ukraine.
Berkshire started buying Occidental shares on February 28, and has amassed its 20% position in the space of 32 trading days this year, according to a Markets Insider analysis of SEC filings and Buffett’s comments. It built more than 70% of the position in 11 days.
“I find it just incredible,” Buffett said about the pace of the purchases during Berkshire’s annual shareholder meeting in April. He attributed the massive trading volumes of Occidental stock, which allowed Berkshire to build its position so quickly, to an unprecedented number of people treating the stock market like a casino, and playing with shares of America’s largest companies like they were poker chips.
“It defies anything that Charlie and I have seen, and we’ve seen a lot,” Buffett added, referring to his business partner and Berkshire’s vice-chairman, Charlie Munger.
Buffett warmed to Occidental after CEO Vicki Hollub laid out a sweeping plan for the company that would maximize long-term cash flows and prioritize shareholder returns. Berkshire also holds $10 billion of Occidental’s preferred stock, and warrants it can exercise to buy 83.9 million common shares for a fixed cost of $5 billion, which it received in exchange for financing Occidental’s takeover of Anadarko Petroleum in 2019.
If Berkshire were to exercise its warrants and keep the resulting shares, it would command a 26.8% stake in the company worth around $16 billion at the current stock price.
Here’s a chart showing Berkshire’s path to building a 20% stake in Occidental this year: