Warren Buffett has been buying more shares in Occidental Petroleum, according to a regulatory filing. As a result Berkshire Hathaway now owns over 22% of the oil company.
The filing shows that the purchases were made at prices between $59.85 and $61.90 per share. With the stock currently priced in the middle of that range, should I buy it myself?
Occidental Petroleum
Buffett is clearly bullish on the price of oil over the long term. As well as Occidental, Berkshire owns a significant stake in Chevron, one of the largest oil companies in the world.
A few years ago, Buffett described an investment in Occidental as a bet on two things. One was the price of oil and the other was the Permean Basin.
So it looks as though the Oracle of Omaha thinks that oil prices are going to remain high and demand for US oil will be strong. Given the underinvestment in oil production recently, this could well be true.
With the stock trading at roughly the price that Berkshire has been buying at recently, it’s tempting to jump in as well. But there are two reasons I’m not going to do this.
First, Buffett has always insisted that the fact that someone else is doing something is not a good enough reason to do it. I agree with this principle.
In order to buy shares in Occidental myself, I need my own view of why I think it will do well over time. It’s not enough to think that someone else – even someone with a great record – has a thesis.
Second, if I want to invest Warren Buffett, I think there’s a better way to do this. Instead of buying shares in Occidental, I’d rather just buy Berkshire Hathaway stock.
Berkshire Hathaway
Warren Buffett’s investment activities are a constant source of interest. Given the Berkshire Hathaway CEO’s track record, that’s hardly surprising.
But the Oracle of Omaha is notoriously secretive about what Berkshire is up to in the stock market. Beyond what regulations require, Buffett dislikes disclosing what he’s up to.
As a result, I think that the best way to invest like Warren Buffett is to buy shares in Berkshire Hathaway and then do nothing. That way, when Berkshire increases its stake in Occidental, my share is also increased.
More importantly, if Buffett changes his mind about a stock and decides to sell, I don’t have to wait for the news to come out. My stake in the business goes down at the same time.
Unlike Occidental, Berkshire Hathaway is a company that I can work out an investing thesis for. It consists of a number of strong businesses and has a culture that allows it to grow steadily over time.
The main risk with the Berkshire Hathaway is that its size presents an obstacle to significant growth. But the company’s renewable energy projects give it at least one long-term substantial opportunity.
Investing like Warren Buffett is a great idea. But the way to do it isn’t by following the Oracle of Omaha into stocks – it’s by owning Berkshire Hathaway shares.
The post Warren Buffett bought this stock last week! Should I? appeared first on The Motley Fool UK.
Like buying £1 for 51p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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More reading
- 1 FTSE 250 stock to buy in March
- The ‘secret sauce’ that makes Warren Buffett richer and richer
- If I’d invested $1,000 in Berkshire Hathaway shares 25 years ago, here’s how much I’d have now!
- 3 shares I’d buy with the FTSE 100 at record highs
- I got Warren Buffett to manage my money. Now I’m worried
Stephen Wright has positions in Berkshire Hathaway. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
