Shares of U.S. oil producer Occidental Petroleum (OXY) fell to $56.17 on Tuesday, dipping below the crucial $60 price point that has historically triggered significant stock purchases by its largest shareholder, Warren Buffett’s Berkshire Hathaway (BRK.A). This $60 level, often referred to as “the Berkshire put,” has typically acted as a price floor for Occidental’s shares, signaling potential buybacks by the investment giant.
Despite the historical pattern, Occidental’s shares have stayed below this threshold throughout August, marking the longest period under $60 since January. At that time, Berkshire Hathaway acquired 4.3 million shares in early February. The absence of recent purchases from Berkshire has led analysts to speculate that Buffett may be holding off on further increasing his nearly 30% stake in the company.
Currently, Berkshire Hathaway’s stake in Occidental is valued at approximately $16.1 billion. The investment firm also holds U.S. regulatory approval to purchase up to 50% of the company. The lack of recent stock purchases is particularly notable given Berkshire’s history of buying Occidental shares during price dips.
Over the past year, Occidental’s stock has declined by 12.3%, in stark contrast to the flat performance of the broader energy sector, as tracked by the Energy Select Sector SPDR Fund (XLE). The stock has faced additional downward pressure following CrownRock LP’s announcement to sell 29.6 million shares, which were originally acquired during Occidental’s $12 billion purchase of the Midland, Texas-based oil producer.
In previous instances, price drops have often prompted Berkshire to make substantial stock purchases. For example, in June, Berkshire acquired 2.56 million shares at prices between $59.86 and $59.75. Similarly, in December, when Occidental’s stock price fell due to debt concerns related to the CrownRock acquisition, Berkshire invested nearly $590 million in additional shares. This trend of opportunistic buying by Berkshire dates back to the fall of 2022, with share purchases made at prices ranging from $57.91 to $61.38.
In addition to its common shares, Berkshire also holds warrants to purchase 83.5 million shares of Occidental at an exercise price of $59.62 per share, as well as preferred stock in the Houston-based company.
The current market dynamics and Berkshire’s strategic decisions raise questions about potential future investments and whether Buffett will continue to bolster his stake as Occidental navigates its financial challenges.
