Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
Although Occidental Petroleum is already a major holding of Berkshire Hathaway, the company purchased an additional 8.9 million shares of Occidental last week. Berkshire’s holdings in Occidental now exceed 260 million shares, with a market value of over $12 billion, making Occidental the sixth-largest holding of Berkshire.
Occidental’s stock price has dropped 35% from its peak in April, which roughly aligns with the price movement of crude oil during the same period. So, should investors follow Buffett’s lead and take advantage of these discounted shares?
Why does Buffett keep buying occidental petroleum stock? Buffett provided part of the answer in his letter to Berkshire shareholders earlier this year. He stated, “Under Vicki Hollub’s leadership, Occidental is doing the right things for both the country and its shareholders… Vicki truly knows how to separate oil from rock (fracking), which is a unique ability that is valuable to her shareholders and to her country.”
Hollub emphasizes that one of the biggest competitive advantages is the location of the company’s project developments. Most of Occidental’s projects are situated in and around the Permian Basin, which has rich infrastructure.
Meanwhile, Occidental is working to divest assets like Barilla Draw and its stake in Western Midstream, which no longer align with the company’s core business.
Aren’t oil and gas being replaced by battery-powered vehicles and other “green” initiatives? Why is Buffett still interested in an industry that seems to have passed its prime? Because oil and gas are far from obsolete.
The reality is that the world is not ready to fully transition from fossil fuels to renewables. According to the latest report from the U.S. Energy Information Administration, 60% of U.S. electricity still comes from fossil fuels, with over 40% coming from natural gas (which is typically found and extracted alongside crude oil). This basic dynamic applies outside the U.S. as well.
Then there are automobiles. While it is undeniable that electric vehicles have become mainstream, only one in five cars sold worldwide last year was an EV. Furthermore, it may take years or even decades for electric vehicles to become more practical than gasoline-powered cars for most consumers.
Perhaps more importantly, although Buffett laments the lack of attractive investment opportunities in the current market environment, he likes buying more shares of companies he already invests in. If you are looking for undervalued dividend-paying stocks, this hint alone is compelling enough.
