Buffett's moves raise questions

Company News

by Glenn Dyer

In the world of investing, Warren Buffett's recent buying and selling activity has prompted discussions about his current investment strategy. After a four-month hiatus, Buffett's Berkshire Hathaway has re-entered the market by acquiring over 4 million shares of Occidental Petroleum in the past week.

Filings with the US Securities and Exchange Commission, disclosed last week, revealed that Berkshire invested nearly a quarter of a billion dollars to bolster its stake in Occidental. This move gave Buffett's company ownership of more than 228 million shares, equating to nearly 26% control of Occidental.

Buffett had been consistently purchasing Occidental stock whenever its price dipped below $60 per share for the past few months, gradually building Berkshire's stake since early last year. However, last week, he was willing to pay more than $63 per share for some of the new shares.

These recent Berkshire purchases coincided with Chevron's announcement of its $53 billion acquisition of Hess Corp., marking the second major deal in the oil sector this month. Just two weeks earlier, Exxon Mobil revealed its plan to acquire Pioneer Natural Resources for approximately $60 billion.

Furthermore, Berkshire is the largest single shareholder in Chevron, owning over 123.1 million shares valued at more than $17.7 billion. Berkshire's stake in Occidental is currently worth around $15 billion.

Berkshire's involvement with Chevron and Occidental began in late 2021 and continued into 2022. Last year, Berkshire received regulatory permission to acquire up to 50% of Occidental, but Buffett has stated that there are no plans to purchase the entire company.

In addition to common Occidental shares, Berkshire also holds 84,897 preferred shares of Occidental that it acquired in 2019 while assisting in financing Occidental's acquisition of Anadarko. Occidental has started redeeming these preferred shares this year at $110,000 each to eliminate the significant dividends the oil producer had to pay on them.

However, there were also some noteworthy sales by Berkshire last week, as the company divested more shares in HP Inc. at a loss, reducing its stake to below 10% of the printer and computer maker.

Berkshire disclosed in an SEC filing that the recent sale of over 3 million shares generated more than $80 million in proceeds. This came after Berkshire revealed earlier in the month and late September that it had sold off 5 million HP shares.

HP's shares were trading around $26 last week, reflecting a sharp decline of nearly 14% over the past month, compared to approximately $30 earlier this year when Berkshire began buying.

Berkshire previously owned more than 12% of HP's stock before initiating its sell-off last month. With its ownership now just below 10%, the Omaha-based conglomerate won't be required to disclose every transaction until its 13F fund managers' filing, which is released 45 days after the end of the quarter. The HP sales and Occidental purchases won't be included in that filing or the quarterly report scheduled for release next week.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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