Warren Buffett.
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- Warren Buffett’s Berkshire Hathaway has built a $5.1 billion stake in Occidental Petroleum.
- Berkshire revealed it owned about 30 million common shares of the energy group on March 1.
- Buffett’s company spent about $3.1 billion to triple its holdings over the next three days.
Warren Buffett’s Berkshire Hathaway has amassed more than 91 million shares of Occidental Petroleum — an almost 10% stake worth about $5.1 billion as of Friday’s close.
The famed investor’s company, which didn’t hold any common shares of the energy group at the end of December, disclosed it owned 29.8 million of them as of March 1 in a regulatory filing this week. It spent about $3.1 billion to triple the size of that position to 91.2 million shares over the next three days, a separate filing shows.
Berkshire already owns $10 billion worth of preferred stock in Occidental, which it received in exchange for providing $10 billion of financing for the oil-and-gas company’s takeover of Anadarko Petroleum in 2019. The preferred shares pay an 8% annual dividend, or $800 million a year.
Buffett’s company also holds warrants for 83.9 million common shares, with an exercise price of $59.62, thanks to the financing deal. However, Occidental’s stock closed at $56.15 on Friday, meaning the warrants are “out of the money” for now. If Occidental’s stock price rises above the exercise price, Berkshire can use its warrants to purchase shares at a discount, then sell them at the market price and make a profit.
Carl Icahn, another billionaire investor and Occidental shareholder, blasted the preferred stock and warrants as far too generous to Berkshire.
“Buffett figuratively took her to the cleaners,” he complained at the time, referring to Occidental CEO Vicki Hollub. “The Buffett deal was like taking candy from a baby and amazingly she even thanked him publicly for it.”
However, Buffett seemed worried about his investment at Berkshire’s annual shareholder meeting in 2020, when the price of West Texas Intermediate crude had slumped to below $30 a barrel.
“If you’re an Oxy shareholder, or any shareholder in any oil-producing company, you’ll join me in having made a mistake so far in terms of where oil prices went,” he said. “Who knows where they go in the future?”
WTI crude has soared more than 50% to a seven-year high of $115 this year, fueled by concerns about supply disruptions due to Russia’s invasion of Ukraine. Occidental shares have rallied to a two-year high as well.
Buffett and his team, who are looking to deploy around $80 billion of cash, clearly decided the stock was undervalued and poised to benefit from rising energy prices, and decided to snap some up.
Read the original article on Business Insider 
