Why Buffett Is Buying Energy Stocks At Multi-Year Highs

For decades, Berkshire Hathaway (NYSE:BRK.B) Chairman and CEO Warren Buffett maintained a pretty conservative approach to investing, favoring retail and banking stocks while giving a wide berth to more volatile sectors such as tech and energy. However, he finally pulled the trigger on PetroChina Co. (NYSE:PTR) in 2002 and Apple Inc. (NASDAQ:AAPL) in 2011. The Oracle’s foray into energy and tech initially paid off after he realized a tidy $3.5B profit on PetroChina, while his $158 billion Apple stake now represents a ridiculous 47% of Berkshire Hathaway’s $330B equity portfolio. Buffett’s later energy buys, such as Suncor Energy Inc. (TSX:SU) (NYSE:SU), Dominion Energy Inc. (NYSE:D), and Chevron Corp. (NYSE:CVX) have all been bought at bargain prices.

Lately, however, Buffett appears to be deviating from his famous ethos of buying stocks with a decent margin of safety. After all, he has been doubling down on his energy investments while trimming his tech and banking holdings despite oil and gas stocks being at multi-year high valuations while tech stocks are decidedly cheaper.

To wit, the legendary investor has added new shares in red-hot E&P companies Occidental Petroleum Corp. (NYSE:OXY) and Chevron Inc. (NYSE:CVX) despite both currently trading at multi-year highs.

According to Berkshire’s latest 13F filing, the company bought 118.3M OXY shares in multiple transactions from March 12 to March 16, bringing its stake in OXY to 136.4M shares, or ~14.6% of its shares outstanding. Berkshire also owns OXY warrants granting the right to acquire some 83.9M additional common shares at about $59.62 each, plus another 100,000 OXY preferred shares.

Earlier, Berkshire revealed that it purchased about 9.4 million shares of oil titan Chevron in the fourth quarter, boosting its stake to 38 million shares currently worth $6.2 billion.

OXY has more than doubled over the past 12 months while CVX is up 55%, with both stocks trading at multi-year highs. But, obviously, Buffet thinks they still have plenty of upside, judging by the huge positions opened by his investment…


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