For decades, the Chairman and CEO of Berkshire Hathaway (NYSE: BRK.B), Warren Buffett, has maintained a very conservative approach to investing, favoring retail and banking stocks, while giving ample leeway to more volatile sectors such as Technology and Energy. In fact, the major US banks were Warren Buffett’s banks Preferred Investment Because they are part of the country’s infrastructure, a nation that is constantly betting on it.
As recently as late 2019, Berkshire had significant stakes in four of the five largest US banks, with Wells Fargo Highest Buffett’s remaining stock for three consecutive years through 2017.
But Buffett appears to have dramatically altered his investing ethos over the past two years, taking billions of dollars in new stakes in energy and computer companies while shunning the banking sector.
After the outbreak of the coronavirus pandemic in early 2020, Buffett’s load was offloaded Wells Fargo (NYSE: WFC), JP Morgan (NYSE: JPM) and Goldman Sachs (NYSE: GS) At a cheap price, although many stocks in the sector are becoming much cheaper to own.
“I like banks in general, I didn’t like the ratio we saw compared to the potential risk if we get the bad results we haven’t had yet,Buffett told investors at last year’s shareholder meeting.
Various analysts have shared their opinions on Buffett’s bank liquidation.
“What this tells you is that he thinks we need to control the openings because we’re looking at a long cycle of inflation and maybe stagnation. Banks are very cyclical, and all indications are that we’re in a high inflation, high rate environment for a while. What that usually means is Lending activity will be compressed and investment activity will declinePhilip Fan, a professor at the Johns Hopkins Carey School of Business, told CNBC.
Despite higher interest rates this year, which usually boosts banks because lending spreads are improving, the banking sector has taken a big hit: WFC is down 14.0% since the beginning of the year, JPM is down 26.2% while GS is down 22.7% on fears the economy will stall. American. The Federal Reserve is fighting inflation by raising interest rates.
Buffett’s Energy Investments
Buffett has been doubling his energy investments while reducing his banking holdings even though oil and gas stocks have been at the top valuations for several years.
For intelligence, the legendary investor added new shares in upstream companies Occidental Petroleum Corporation. (NYSE: OXY) and Chevron Corporation (NYSE: CVX) Although both are currently trading at multi-year highs.
to me The latest 13F file from Berkshire, the company purchased 118.3 million shares of OXY stock in multiple transactions from March 12 to March 16, increasing its stake in OXY to 136.4 million shares, or approximately 14.6% of its outstanding shares. Berkshire also owns warrants of OXY that grant the right to acquire approximately 83.9 million additional common shares at $59.62 per share in addition to another 100,000 preferred shares of OXY. Earlier, Berkshire revealed that it bought about 9.4 million shares of oil giant Chevron in the fourth quarter, increasing its stake to 38 million shares, currently worth $6.2 billion.
OXY has doubled over the past 12 months, while CVX is up 50%, with both stocks trading near multi-year highs. But, obviously, Buffett thinks they still have a lot of upside judging by the huge positions his investment conglomerate has opened.
Buffett is not alone.
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OXY CEO Vicki Hollub Pick up OXY stocks In the open market, even with stocks trading near three-year highs. according to SEC . depositHolub paid $798,000 on March 28 for 14,191 shares of OXY stock at an average price of $56.24, bringing its holdings to 467,282 shares and an additional 23,390 shares through a savings plan. Holub last bought OXY shares on the open market nearly three years ago, when she paid $1.8 million for 37,460 shares at an average of $48.15 per share on June 10, 2019.
Wall Street is intrigued by OXY, too.
Raymond James analyst John Freeman recently raised OXY’s price target to $85 from $60, Setting a new high on Wall Street. This is good for nearly a 50% rise.
OXY 9 Strong Buying Reviews; 2 buys, 13 contracts, 1 sell, 1 sell chain on Wall Street.
Meanwhile, record player APA Corp. (NYSE: APA) rose to a 52-week high after Mizuho Upgrade stocks to buy of Neutral with a target price of $56, up from $38, saying the company is in a “unique position” among oil and gas producers.
Mizuho says that APA has “A clear plan for a 10% cash surplus 2022-24 at current oil prices combined with near-term growth (Egypt) and long-term development catalysts (Suriname) outside the United States.“
“Energy is the only sector that is simultaneously improving its quality, growth and momentum scores while maintaining an attractive value and income profile.,” told Lacuse-Bogas of JPMorgan Business Insider, adding that current estimates are conservative and underestimate strong macro fundamentals going forward.
According to JPM, the energy sector is still seeing a remarkable uptick despite the massive rise it experienced last year. JPM says a combination of rapid earnings growth and a reclassification of major multiples will help fuel the upside in this sector.
One final note: Oil stocks remain undervalued, with The S&P energy sector is still far behind its 2014 levels from the last time oil topped $100 a barrel.
By Alex Kimani for Oilprice.com
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