The famed investor’s conglomerate has piled roughly $20 billion into Chevron and around $10 billion into Occidental, a Markets Insider analysis of Securities and Exchange Commission filings shows. Those positions are now worth $29 billion and $14 billion respectively, or $43 billion together, as of Monday’s close.
Berkshire established a stake in Chevron in the second half of 2020. It more than quadrupled its position in the first quarter of this year, and topped it up to 161 million shares, or 8.2% of the company, in the second quarter. The wager has paid off so far, as Chevron’s stock price has surged 52% to an all-time high this year.
Warren Buffett’s Berkshire Hathaway reveals how inflation, worker shortages, supply constraints, and flagging consumer demand are hitting American companies
Utilities and real estate
In addition, Buffett and his team built a nearly 21% stake in Occidental from scratch this year, primarily in early March. They have scooped up 194 million shares to date, and Occidental stock has jumped 134% this year.
At the same time, Berkshire owns $10 billion of preferred stock in Occidental, as well as warrants entitling it to buy another 83.9 million common shares at a fixed cost of $5 billion. Those shares would be worth $6.1 billion at the current stock price.
Even excluding the preferred stock and warrants, Chevron and Occidental now rank among the most valuable positions in Berkshire’s portfolio. Only five of the conglomerate’s top 15 holdings were valued at north of $10 billion at the end of December, and only two above $25 billion.
The fossil-fuel wagers stand out from Berkshire’s biggest holdings, many of which are longtime Buffett favorites in the consumer-products and financial-services sectors. Those include Apple, Bank of America, Coca-Cola, Kraft Heinz, and American Express.
Buffett and his team bought the lion’s share of their Chevron and Occidental shares in late February and early March, suggesting they saw a chance to capitalize on the surge in energy prices sparked by Russia’s invasion of Ukraine on February 24. Or they may have simply determined the two companies were undervalued, well-managed, and good sources of income.
It’s worth noting the Biden administration has accused major oil companies of “war profiteering,” and threatened them with a windfall tax if they don’t use some of their outsized profits this year to invest in domestic production. That headwind could weigh on Chevron and Occidental shares going forward.
For now, the two wagers are helping Berkshire to weather a tough market backdrop. While fears of inflation, recession, and further interest-rate hikes have pulled the S&P 500 down 19% this year, Berkshire shares are only down 2%.
Buffett might also see the pair of energy bets as a portfolio hedge against a broader market decline, and a way to offset the painful impact of higher fuel costs on several of Berkshire’s businesses.
“He wants that exposure to potential higher inflation, higher oil prices,” Josh Young, a fund manager and specialist in energy stocks, said about Buffett’s Occidental bet in August.
Berkshire will reveal how much it spent on stocks last quarter, and which names it bought and sold, when it publishes its third-quarter earnings and portfolio update later this month.