June 24, 2023 • By Andrew Shilling
Steve Kolano quoted in this MarketWatch article
Warren Buffett has continued to snap up millions of shares of Occidental Petroleum (OXY) in recent months despite the company’s stock posting a 9.7% loss so far in 2023, according Morningstar data through June 22. So why is one of the world’s most successful investors consistently buying up shares of a losing stock? Experts say it all comes down to timing — but beware: attempting to replicate the 92-year-old philanthropist’s approach doesn’t mean you’ll make money. (Looking for a new financial adviser? This tool can match you to an adviser who may meet your needs.)
After adding nearly 4.66 million shares of Houston, Texas-based petrochemical manufacturing company OXY, 0.26% to his portfolio back in late May, and another 2.2 million by the end of that month, Buffett’s investment firm Berkshire Hathaway has amassed 222 million total shares of the company’s stock worth an estimated $13 billion, or a 24.9% stake. In the first six months of 2023, however, OXY has largely underperformed broader market indexes with the S&P 500 Index ( SPX, -0.34% ) gaining 14.13% and the Dow Jones Industrial Average ( DJIA, +0.07% ) up 4.97% through June 22, according to Morningstar. Over the past 12 months, OXY has posted a 3.53% loss with SPX and DJIA both notching gains of 16.27% and 11.65%, respectively, data show.
What’s behind the stock’s short-term declines? Dave Meats, a chartered financial analyst and director of research, energy and utilities at financial services firm Morningstar, says much of the reasoning behind OXY’s near-term losses, much like the broader energy sector, relates to falling commodity prices. “WTI crude has declined over $6 this year, as supply losses from Russia have been milder than expected, while the broader economy is growing more slowly,” he says. Commodity prices, much like stocks, are largely tied to the powers associated with supply and demand – when demand is low, prices typically diminish; when they are high, prices rise. (Looking for a new financial adviser? This tool can match you to an adviser who may meet your needs.)
Buffett’s investing. Should you?
Despite OXY’s losses so far this year, the company has nevertheless either outperformed or posted figures similar to many of its industry peers, including Chevron Corp. ( CVX, 0.23% ), EOG Resources Inc. ( EOG, 1.12% ) and Pioneer Natural Resources Co. ( PXD, 0.55% ), each of which have YTD losses of 13.28%, 14.38% and 8.44%, respectively as of June 21, according to Morningstar.
But viewing OXY’s performance numbers over certain segments may provide some insight as to why Buffett has his eye on this particular company. Aside from both short-term and even a longer-term annualized loss of 5.45% over the 5-year period, OXY notched a whopping 100.46% gain sInce October 30, 2020, according to Morningstar data.
