Warren Buffett shakes off recession fears as he piles another $216 million into Occidental Petroleum stock
Warren Buffett doesn't seem cowed by the threats of inflation, recession, or a credit crunch.
The investor's Berkshire Hathaway bought another $216 million or so of Occidental Petroleum stock.
Buffett's company has poured more than $11 billion into the oil-and-gas company in just over a year.
US investors face a thorny combination of rising interest rates, stubborn inflation, a looming recession, and a potential credit crunch. Warren Buffett is forging ahead with stock purchases anyway.
The famed investor's Berkshire Hathaway poured $216 million into Occidental Petroleum within the past three trading days, a Securities and Exchange Commission filing revealed Monday.
Buffett's conglomerate scooped up nearly 3.7 million shares, boosting its stake to almost 212 million shares or 23.6% of the oil-and-gas company. Occidental stock rose 3% in premarket trading Tuesday, after the news.
Berkshire has invested a total of more than $11 billion into Occidental over the past year or so, a Markets Insider analysis shows.
The vote of confidence from Buffett, coupled with Russia's invasion of Ukraine causing energy prices to spike, helped drive Occidental stock up 117% last year, making it the S&P 500's best performer of 2022.
Berkshire resumed purchasing Occidental shares a few weeks ago after a five-month hiatus. It may be buying on weakness, as the energy stock has tumbled 23% from its August peak to trade around $60 as of Monday's close. Berkshire's stake is worth $12.6 billion at that price.
Buffett praised Occidental CEO Vicki Hollub early last year for paying off the company's debts and ramping up returns to shareholders. "She's running the company the right way," he told CNBC.
Occidental generated a record $13.6 billion in free cash flow before working capital last year, its latest annual report shows. It used some of the excess money to retire $10.5 billion of debt, saving itself an estimated $400 million in yearly interest and financing costs.
The fossil-fuel specialist also spent $3 billion on stock buybacks last year, and hiked its quarterly dividend by 38% to 18 cents a share in February. It plans to begin redeeming some of Berkshire's preferred stock next year, and expects that to free up more cash to return to common shareholders.
Berkshire holds $10 billion of Occidental's preferred stock, which is redeemable at a 10% premium, and yields $800 million in annual dividends. It also holds warrants it can exercise to buy about 84 million additional common shares at a fixed cost of $5 billion. Berkshire received both the preferred stock and warrants in return for financing Occidental's takeover of Anadarko Petroleum in 2019.
Buffett and his team won approval from regulators in August to increase their Occidental ownership to 50%, suggesting there could be more stock purchases to come.
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