Warren Buffett, CEO of Berkshire Hathaway, has made headlines with his substantial $13 billion investment in Occidental Petroleum, a stake that has recently come under pressure as oil prices hit a three-year low. Since mid-April 2024, crude oil prices have plummeted by 23%, driven by concerns over demand and oversupply in the market. This decline has adversely affected Occidental's stock, which has fallen 29% during the same period, trading just above $50 per share [c7c79694].
Buffett began acquiring shares in Occidental Petroleum in early 2022, with an average purchase price of $51.22. In addition to his current holdings, he owns warrants for an additional 83.5 million shares at a strike price of $59.62. However, the company's CEO, Vicki Hollub, has indicated that a share buyback will not occur until the company pays off $15 billion in debt, which is expected to be completed by late 2026 or early 2027 [c7c79694].
This situation adds to Buffett's recent trend of selling off stocks and raising cash, reflecting his cautious approach amid economic uncertainties. In the second quarter of 2024, Berkshire Hathaway sold nearly half of its stake in Apple, reducing it to an estimated value of $84.2 billion. This move is part of a broader strategy to reduce exposure to stocks and accumulate cash reserves, which have reached a record high of nearly $277 billion [5c72ebb0] [d9441e29] [ebc700fd] [fbe1a725].
Despite the challenges faced by Occidental Petroleum, Buffett's investment philosophy remains focused on long-term value. He still holds a significant stake in Bank of America, valued at $39.5 billion, and has been trimming this position as well, selling over $3 billion in stock recently [de7071b1] [fbe1a725].
Buffett's cautious stance is further underscored by the disappointing jobs report and calls from major Wall Street banks for the Federal Reserve to implement rate cuts. As traders react to bad news, Buffett's strategy of maintaining a strong cash position may serve as a buffer against market volatility [ebc700fd] [fbe1a725].
In addition to his investments in Occidental and Bank of America, Buffett's Berkshire Hathaway continues to hold a substantial 400 million shares of The Coca-Cola Company, which pays a quarterly dividend of $0.485 per share. This consistent dividend income contributes to Berkshire's financial stability and growth potential [de7071b1] [fbe1a725].
Overall, while Buffett's investment in Occidental Petroleum faces significant headwinds due to falling oil prices, his broader strategy of cautious investment and cash accumulation reflects a seasoned approach to navigating current market challenges [c7c79694].