Buffett's Bold Move: Berkshire Boosts Stake in Occidental Amid Financial Growth

Warren Buffett’s Berkshire Hathaway purchased an additional 8 million shares of Occidental Petroleum (OXY) in December, increasing its total stake to nearly 30%. This move comes after a six-month pause and reflects confidence in Occidental’s improving financial health.

Key Financial Highlights

• Debt Reduction and Financial Strength: Berkshire’s renewed interest coincides with Oxy’s significant progress in paying down debt, which began when Berkshire first started investing. The company maintains a net-debt leverage below 0.75x equity, supported by more than $1.8 billion in cash.
• FQ3 2024 Results: Revenue declined due to lower oil prices but was better than expected. Margins improved significantly, with $1.5 billion in free cash flow enabling sustained capital returns and further debt reduction.
• Balance Sheet Growth: Total assets grew 20% year-over-year, driving an 18% increase in equity. Receivables, inventory, and cash balances showed strong growth.

Dividends and Growth Outlook

• Occidental’s cash flow supports consistent dividend payments, with about 25% of 2024 earnings allocated to payouts.
• A double-digit dividend increase is expected in Q1 2025, backed by an optimistic 5% earnings growth forecast for 2025.

Market Momentum

• Stock Rebound: OXY shares rebounded from multi-year lows in December, with technical indicators signaling potential bullish momentum. Analysts anticipate a price target of $62 by late Q1 or early Q2 2025, fueled by strong economic activity and easing regulatory conditions.

Bottom Line

Berkshire’s latest investment underscores its confidence in Occidental Petroleum’s robust financial health, improving cash flow, and long-term growth potential, positioning OXY for a strong upswing in 2025.