OXY stock doubled this year. Why is Buffett still buying?

Moomoo Learn joined discussion · May 12, 2022 04:45

Buffett's buying more oil shares

Warren Buffett can't stop loving $Occidental Petroleum(OXY.US)$.

The recent acquisition of Buffett has caught the attention of the market. Not just because this isn't the first time he's bought $Occidental Petroleum(OXY.US)$, but especially because he bought it when the market was panic selling.

Source: SEC

Warren Buffett's $Berkshire Hathaway-A(BRK.A.US)$ increased its position in $Occidental Petroleum(OXY.US)$ at $56 to $58.37 a share for 5.9 million shares according to the latest filing from SEC on May 5, 2022.

Berkshire's stake in the oil company has grown to about 15.2% following the recent deal, according to a Reuters report.

OXY stock doubled this year. Why is Buffett still buying?

Shares of $Occidental Petroleum(OXY.US)$ have more than doubled this year as Berkshire Hathaway stepped up buying and oil prices rose due to the Russia-Ukraine conflict.

Global benchmark Brent crude futures surged sharply over the past year on fears of a supply shock.

Source: moomoo - Markets - Futures - Energy

Why Buffett takes more OXY shares?

1) Soaring oil prices support earnings

Against the backdrop of soaring commodity prices, Occidental Petroleum is one of the immediate beneficiaries of this trend. It's no surprise that Buffett continues to buy.

A surge in oil prices provided strong support for Occidental Petroleum's earnings report. The company has swung to a profit in its Q1 2022 earnings released on May 10.

Net income: $4.7 billion, from a loss of $346 million in Q1 2021.

Revenue: $8.5 billion, from $5.5 billion in the same period of last year.

2) Value and defensive stocks are preferred in bear markets

Berkshire Hathaway is on a shopping spree in 2022, even though he complained that he couldn't find any attractive deals on the stock market earlier this year.

In addition to Occidental Petroleum, Buffett has increased his investment in another oil company, $Chevron(CVX.US)$, and bets on video game maker $Activision Blizzard(ATVI.US)$, computer maker $HP Inc(HPQ.US)$ and insurance company $Alleghany Corp(Y.US)$.

Purchases of Buffett in 2022 mostly come from traditional value stocks, which offer more of a valuation advantage than tech stocks with lofty valuations.

Concerns for high-growth tech stocks are a boon for Buffett's investing style, which benefits his value-driven approach as the market moves toward cheaper and more defensive industries.

Oil stocks have been regarded as a defensive play over the past year.

What are defensive stocks? Why are defensive stocks worth investing in? What types of safe-haven assets could help retain wealth in a turbulent market?

See our latest course for more information: What are the safe-haven assets?

Is oil still a good investment?

Lets review our share on March 7: Oil prices are rallying, and Buffett is buying.

The agency believes that high oil prices are good for the performance release of relevant industrial chains.

The short-term trend of oil prices still needs to continue to follow the evolution of the situation in Russia and Ukraine, and it doesn't rule out that oil prices will continue to rise.

Since the recovery of crude oil supply usually lags behind the recovery of demand, there is still the possibility of rapid recovery of demand and relatively tight supply of crude oil from January to February, even if the conflict between Russia and Ukraine is not taken into account. Short-term oil prices also have strong fundamental support.

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