Warren Buffett Loves His Oil Stock, but Here Are 2 Better Ones…

Sometimes it’s more comfortable to go back to your roots. 

For investors, that comfort in knowing your investment well is one of the keys to success in this market. 

That goes for every investor on the planet, from the smallest trading account all the up to the world’s greatest investor, Warren Buffett. 

As he would put it, "Invest in what you know!"

And believe it or not, Warren Buffett knows oil stocks.

In fact, the first stock Buffett ever purchased was an oil company called Cities Services way back on March 11, 1942, at the tender age of just 11 years old.

I know that name won’t ring a bell for most of my readers; I’ll confess that I didn’t recognize it at first, either. My generation would be more familiar with the name it adopted a few decades later — Citgo.

Then Citgo was acquired in 1983 by an oil company that I know you’ve all heard of named Occidental Petroleum.

Did you put the puzzle pieces together yet?

What if I told you that Warren Buffett has been hungry for oil stocks for years? 

Back when the Bakken oil boom in North Dakota was hitting a peak, Buffett's Berkshire Hathaway shelled out a cool $26 billion for a rail stock named Burlington Northern Santa Fe. 

It was an incredibly smart move since pipeline capacity in North Dakota was full to the brim, and the next best way to get that flood of crude oil to market was via railway. 

So it was a surprise to nobody when Berkshire started buying up shares of Occidental Petroleum. 

Yes, THAT Occidental. 

The Oracle of Omaha had finally gone back to his roots, and that decision has been cramming cash into his pocket ever since.

During the summer and fall of 2022, Berkshire scooped up more than 20 million shares of Occidental Petroleum. Between September 26 and September 28, it doled out about $352 million adding shares to its position. 

By the time the new year rang in, Berkshire controlled nearly 200 million shares of Occidental. To put a little perspective on this massive position, keep in mind that Occidental has approximately 892 million shares outstanding today.

And like I said, Buffett's been hungry for oil stocks; the only question in his mind was timing. 

You’re going to love what happened next…

In March 2023, Buffett gave Berkshire the green light again, this time snapping up 5.8 million shares of Occidental Petroleum. 

For the record, those purchases cost him another $350 million. 

But Buffett was far from finished.

Last month, Berkshire loaded up on even more Occidental shares, this time adding almost 5 million more shares to its books. 

Now Berkshire controls more than 25% of Occidental Petroleum and its position is worth closer to $13 billion!

But you know what? 

Buffett chose the wrong oil stock.

Don’t get me wrong — he’s going to make an extraordinary amount of money owning more than one-quarter of the Permian Basin’s largest landholder. Moreover, Occidental Petroleum is a good fit for his strategy. 

Buffett loves the stability of big brands, and Occidental is precisely that in the U.S. oil patch. 

If I had the pick of the litter, I would’ve first looked at strong Permian producers like Matador Resources or Diamondback Energy, both trading at levels that are as attractive as Occidental if not more!

But the one thing I’ll say for Buffett is that he sees something most of the investment herd doesn’t — the end of the shale boom. 

I'll have more on that next week.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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