Warren Buffet just bought 9.5 million shares of this oil stock. Should you?
Buffett's stake in Texas-based Occidental now totals US$8.5 billion. With the stock dipping after a strong start to the year, it's worth a look.
Billionaire investor Warren Buffett's Berkshire Hathaway scooped up another 9.5 million shares of oil exploration company Occidental Petroleum (OXY) last week, a recent filing with the US Securities and Exchange Commission (SEC) shows, bringing his total stake in the company to approximately US$8.5 billion.
Shares of Occidental traded at US$56.70 at the time of this writing Thursday afternoon, up almost 2% for the day.
Buffett picked up these shares on the dip amid a broad selloff in the energy sector, which means he thinks Occidental's current price is a good value. Should you be buying too?
Buffett's bet on Occidental and oil.
An SEC filing dated June 22 shows Buffet picked up his 9.5 million shares of Occidental Petroleum at an average share price of US$55.58. The transactions were dated June 17 and June 22, two days when Occidental stock was trading at its lowest in over a month.
Buffett's purchase comes amid a broad selloff in the energy sector that has pulled shares of Occidental and other oil companies down by more than 20% from their recent highs, prompting some to question whether the energy sector and more specifically, oil stocks, are losing their luster. Oil prices have fallen more than US$19 in the past two weeks, returning to levels not seen in about a month.
But Buffett wouldn't have committed another US$535 million to Occidental if he didn't think the stock at US$55 was a good value. The stock is down by around 25% from its recent high. Meanwhile, the average analyst price target on the stock is US$77.26, representing a 38% premium over its current price.
Buffett told CNBC in March when he revealed his stake in Occidental that Occidental CEO Vicki Hollub was running the company the right way and doing "exactly what I would be doing." Last week's purchases confirm he still is optimistic about the company's future.
Thinking of buying Occidental Petroleum stock?
Damien Courvalin, head of energy research for Goldman Sachs, told CNBC's Joe Kernen last week that he sees oil prices hitting US$140 before balancing out.
He's not the only expert to say oil prices will go higher from here, so the selloff in oil stocks might just be the sector getting ready for another leg up.
Buffett didn't hesitate to scoop up another 9.5 million shares of Occidental on the recent pullback. Are you buying too?
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At the time of publication, Matt Miczulski owned shares of OXY.