Warren Buffett’s Main Investing Focus Right Now — and How It Could Make Him Billions
The legendary investor is turning his attention to the energy sector, betting on Chevron and Occidental Petroleum for potential lucrative gains.
Warren Buffett, the renowned investor and chairman of Berkshire Hathaway, has been making headlines for his recent investment activity. While he has been reducing his overall stock holdings, one sector has caught his attention: energy. Buffett’s focus on Chevron and Occidental Petroleum suggests that he sees significant potential for growth and profitability in the energy industry. This article explores Buffett’s investment strategy, the reasons behind his interest in these companies, and the potential for billions in returns.
Buffett’s Interest in Chevron and Occidental Petroleum:
A substantial stake in Chevron
Berkshire Hathaway’s holdings reveal Buffett’s confidence in Chevron, as it now ranks as the fifth-largest position in the conglomerate’s portfolio. Buffett initially invested in Chevron in 2020 when the stock was undervalued due to the COVID-19 pandemic’s impact on travel. Despite trimming the position in subsequent quarters, Berkshire Hathaway increased its stake in Chevron by over 14% in the fourth quarter of 2023.
Revisiting Occidental Petroleum
Buffett’s interest in Occidental Petroleum began in 2019 but waned by mid-2020 when he exited the position entirely. However, he resumed buying the stock in early 2022 and has steadily increased his holdings since then. Berkshire Hathaway now owns a substantial amount of Occidental Petroleum, positioning it as the sixth-largest holding in the conglomerate’s portfolio.
Why Buffett Believes in Chevron and Occidental Petroleum:
Attractive valuations and growth prospects
Buffett’s investment decisions are often driven by valuation, and both Chevron and Occidental Petroleum offer attractive pricing compared to the broader market. Chevron’s forward earnings multiple is 11.6x, while Occidental Petroleum trades at 14.6 times forward earnings. However, it is the growth potential of these companies that likely appeals to Buffett the most.
A supply shortage and climate change considerations
Buffett holds Occidental CEO Vicki Hollub in high regard, praising her competence and understanding of the oil industry. Hollub recently predicted a supply shortage of oil by the end of 2025, which could lead to a surge in oil prices and subsequently boost the share prices of both Chevron and Occidental Petroleum. Additionally, Buffett recognizes the long-term demand for oil and gas and supports efforts to develop carbon capture technology. Both Chevron and Occidental Petroleum have invested in carbon capture projects, aligning with Buffett’s vision for a sustainable future.
Conclusion: Warren Buffett’s recent focus on Chevron and Occidental Petroleum highlights his belief in the potential for significant returns in the energy sector. While the legendary investor has been reducing his overall stock holdings, his interest in these companies suggests that he sees value in their attractive valuations and growth prospects. Moreover, Buffett’s support for carbon capture technology aligns with his long-term view on the demand for oil and gas. Whether or not these investments make billions for Buffett, both Chevron and Occidental Petroleum present compelling opportunities for investors seeking exposure to the energy industry’s potential upside.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as financial advice.