Renowned investor Warren Buffett, also known as the Oracle of Omaha, has consistently outperformed the broader markets for nearly seven decades. His investment moves are closely watched by Wall Street due to his successful track record of generating significant gains over time.
Currently serving as the chairman of a conglomerate, Buffett’s recent SEC filings show that the conglomerate reduced its stakes in technology giant Apple and banking institution Bank of America in the second quarter of 2024, resulting in an increased cash reserve of US$277 billion. This strategic move has surprised investors, leading to speculation that Buffett may be preparing for a potential economic downturn and positioning the conglomerate to capitalize on discounted investment opportunities.
On the contrary, the conglomerate has significantly increased its investment in Occidental Petroleum over the past three years. Berkshire’s acquisition of three million shares of Occidental in Q1 of 2024 raised their stake in the company to nearly 29%, solidifying Occidental as a core position in Buffett’s equity portfolio.
Occidental Petroleum, valued at US$51.4 billion by market capitalization, engages in oil and gas exploration and development across regions such as the U.S., the Middle East, and Africa. With three distinct business segments including Oil and Gas, Chemicals, and Midstream and Marketing, Occidental boasts a diversified portfolio of cash-generating assets, enabling it to offer shareholders an annual dividend yield of 1.6%.
By reporting strong performance and free cash flow of over US$700 million in Q1 of 2024, Occidental Petroleum maintains a healthy payout ratio and remains capable of pursuing strategic acquisitions, reducing debt, and potentially increasing dividends. Despite carrying long-term debt, Occidental Petroleum’s low payout ratio and attractive forward earnings multiple make it an intriguing investment opportunity for value-focused investors.
