According to these 2 signals, Warren Buffett is no longer trusting energy stocks. Is it time to sell?
Although Berkshire Hathaway has become well positioned in the energy sector in recent years, accumulating shares of $CVX+0.2% and $OXY+0.0%, it looks like they are currently re-evaluating their position based on 2 reasons, which we will look at today.
Although Berkshire Hathaway $BRK-B+1.0% has started to position itself well in the energy sector in recent years, where it has accumulated shares of $CVX+0.2% and $OXY+0.0%, it looks like they are currently re-evaluating their stance based on these 2 reasons.
What are the 2 reasons mentioned?
1. Selling $CVX+0.2% stock
Chevron
CVXWarren Buffett's Berkshire Hathaway sold an estimated $6 billion worth of Chevron stock last quarter, an earnings report revealed Saturday.
The famous investor's company revealed that the value of its Chevron holdings fell 28% in the first quarter to below $22 billion.
Overall, Berkshire sold about $13 billion worth of shares in the quarter. The cost basis of commercial, industrial and other stocks fell by $7.9 billion, suggesting that sales were concentrated in that category, which includes Chevron.
Buffett and his team reduced their stake in Chevron by about 20%, or 35 million shares, to about 163 million shares. This number is based on the stated decline in the value of the position and the average share price of the fossil fuel titan.
2. Occidental ultimately does not plan to fully take over
Warren Buffett said Saturday that Berkshire Hathaway doesn't plan to acquire Occidental Petroleum, but remains comfortable with its large investment in the oil company.
Speaking at Berkshire's annual general meeting, Buffett dismissed speculation that Berkshire would buy Occidental after amassing a 23.6% stake.
"We will not be making any offer for Occidental," Buffett said.
Analysts and investors said the acquisition could diversify Berkshire's energy portfolio, which includes several companies, electricity distributors and renewable energy projects.
Berkshire began accumulating shares of Houston-based Occidental in February 2022, around the time Russia invaded Ukraine.
Buffett also has a close relationship with Occidental CEO Vicki Hollub, who has been reducing debt and returning cash to shareholders since the company bought Anadarko Petroleum Corp in 2019.
Last August, Berkshire won approval from the U.S. Federal Energy Regulatory Commission to buy up to 50% of Occidental's common stock, so there has been frequent speculation about whether Buffett will continue the purchases and eventually take over all of OXY.
Conclusion
However, the Berkshire boss and his team did buy approximately $1 billion worth of Occidental Petroleum stock last quarter, suggesting that they are not completely bitter about the oil and gas sector as a whole. Overall, however, these two factors suggest a general reorientation towards this sector, which they have overweighted in recent years.
During Berkshire's AGM on Saturday, Buffett revealed that his team spent about $400 million on the stock in April and sold $4 billion worth of shares. That suggests that Berkshire has sold nearly $29 billion worth of stock in the past seven months, suggesting that they weren't primarily after selling energy stocks.
Whether or not Buffett has reconsidered his stance on the energy sector is a highly speculative topic. Some think he has, but others see it as just a routine position reduction (CVX) and a statement to the other (OXY).
For example, analyst Shanahan stated:
"As a result, I don't believe Buffett necessarily made a statement about energy stocks or the valuation of energy stocks," Shanahan said.
- What do you think about this? Is Berkshire rethinking its stance on the energy sector? 🤔
Please note that this is not financial advice.