Warren Buffett’s Berkshire Hathaway has resumed buying Occidental Petroleum’s stock after a five-month break.
Buffett’s company spent $355 million in three days, raising its stake in the energy giant to 22.2%.
Occidental’s stock soared nearly 120% last year, making it the S&P 500’s best performer of 2022.
Warren Buffett’s luck changed this year, allowing him to spend a record sum on stocks and end his deal drought. Here are his 6 highlights of 2022.
Warren Buffett spent a record sum on stocks and made a major acquisition in 2022.
The Berkshire Hathaway CEO tore into bitcoin, adjusted some overseas bets, and gave a surprise gift.
Here are the investing icon’s 6 highlights of 2022.
Warren Buffett’s luck changed in 2022. After years of battling to find bargains and watching Berkshire Hathaway‘s cash stack up, the famed investor seized his chance to put his conglomerate’s mountain of money to work.
Buffett spent a record sum on stocks, executed a major acquisition, and made some striking changes to his overseas bets. He also crowed about four of Berkshire’s key holdings in his yearly letter, trashed bitcoin at the annual shareholders’ meeting, and made a surprise donation to his children’s charities.
Here are Buffett’s 6 highlights from 2022:
The annual letter
Buffett published his famous annual letter to Berkshire shareholders in February.
The investor vented his frustration with Berkshire’s mammoth $144 billion cash pile, blaming a lack of bargains in the stock market. He also celebrated the “Four Giants” among Berkshire’s businesses: insurance, railroads, energy, and its enormous Apple stake.
Moreover, Buffett appeared to respond to criticism of his tax practices by noting Berkshire paid $3.3 billion of federal income tax in 2021 — nearly 1% of all the corporate income taxes collected by the US government that year.
Buffett struck a deal to buy Alleghany for nearly $12 billion in March. Berkshire completed its takeover of the insurer in October, ending a years-long drought on the acquisition front.
The investor showcased his trademark approach to dealmaking, which prizes trust and simplicity. He proposed the merger over dinner with Alleghany’s CEO, who previously ran a Berkshire subsidiary, and the pair formally announced a deal less than two weeks later.
Buffet also refused to budge on the deal terms, and when Alleghany enlisted Goldman Sachs as a financial advisor, he insisted the investment bank’s fee was subtracted from Berkshire’s offer price.
An epic buying spree
Berkshire plowed a net $41 billion into stocks in the first quarter of 2022, setting a new record for its quarterly spending on equities.
Buffett and his team built large stakes in HP, Chevron, Occidental Petroleum, Citigroup, Paramount, and Taiwan Semiconductor in the first nine months of 2022. Berkshire also spent over $5 billion on buybacks and made other sizeable purchases, lifting its spending on stocks and acquisitions for the year to an astounding $70 billion or so.
The annual meeting
Buffett hosted Berkshire’s annual shareholder meeting in his hometown of Omaha, Nebraska in April, after two years of virtual gatherings due to the pandemic.
The investor called out the reckless speculation in the stock market, underlined the grave threat posed by inflation, and declared he wouldn’t pay $25 for all the bitcoin in the world.
Buffett made some big moves in 2022 that deserve special attention. For example, he poured a total of about $30 billion into Chevron and Occidental, propelling the pair of oil-and-gas companies onto the list of Berkshire’s most-valuable holdings.
The investor and his team also revealed in November they had boosted their billion-dollar bets on Japan’s five largest trading houses.
In contrast, they sold BYD shares for the first time in 14 years. Berkshire has now slashed its position in the Chinese electric-vehicle maker by around 22%, and pocketed an estimated $1.2 billion profit from the disposals.
An unexpected gift
Buffett made his usual annual donation of Berkshire stock in June, dividing the $4 billion gift between the Bill & Melinda Gates Foundation and four of his family’s charities.
Unexpectedly, he contributed a further $759 million worth of Berkshire stock to his three children’s foundations for Thanksgiving, saying he was proud of their charitable work and wanted to show his appreciation.
7/7 SLIDES
Warren Buffett’s Berkshire Hathaway has resumed buying Occidental Petroleum shares after a five-month hiatus, signaling the famed bargain hunter once again views the oil-and-gas giant’s stock as undervalued.
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Buffett’s company scooped up 5.8 million Occidental shares during the past three trading days, boosting its stake to 200 million shares or 22.2%, a Securities and Exchange Commission filing on Tuesday revealed. Its last purchase was in late September.
Berkshire paid about $355 million for the new shares, lifting its spending on Occidental stock to around $11 billion in just over a year. The conglomerate’s stake is worth over $12 billion, based on Occidental’s closing price of $60.85 on Tuesday.
Occidental’s stock price surged by nearly 120% last year, making it the S&P 500’s top performer of 2022. It was virtually flat year-to-date as of Tuesday’s close, but climbed about 3% in pre-market trading on Wednesday — likely on the news of Berkshire’s latest purchases.
Buffett values Occidental’s domestic strength and the fact it’s cutting its debt pile, paying dividends, and buying back shares, CEO Vicki Hollub has said. The surge in energy prices last year, sparked by the Russia-Ukraine war, has also buoyed Occidental’s profits.
Berkshire secured regulatory approval in August to own up to 50% of Occidental, indicating it wasn’t done building its stake. It also poured roughly $20 billion into Chevron last year, and counted the energy titan among its top five holdings on December 31. The two massive bets suggest Buffett and his team are finding value in the fossil-fuel sector.
In addition to its 22.2% stake in Occidental, Berkshire holds $10 billion of the company’s preferred stock, which yields $800 million of yearly dividends. It also owns warrants it can exercise to buy about 84 million common shares at a fixed cost of $5 billion. It received both the preferred stock and warrants in return for financing Occidental’s takeover of Anadarko Petroleum in 2019.
Buffett’s company included $258 million of Occidental’s after-tax earnings in its reported income last year. It started accounting for its stake using the equity method after clearing 20% ownership in August.
