Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B, BRK-A) has been making some pretty notable bets in energy stocks over the past several years. Undoubtedly, the conglomerate is sitting on a rather large stockpile of cash. And relative to the growing cash position, some of its recent energy bets may be somewhat less newsworthy but still worth examining.
Indeed, beginning value investors seeking to know where the Oracle of Omaha and company may see the “sales” to be had in a scorching AI-driven stock market may be directed towards the energy patch this summer.
Buffett’s energy stocks may lack the explosive euphoria to be had in AI chip and software stocks. But if you, like Buffett, appreciate steady cash flows, earnings growth, and very reasonable, even cheap valuations, the following slate of stocks seems worth watching closely or even buying, if not for the energy exposure for the potential deep value.
Occidental Petroleum (OXY)
Berkshire hasn’t made a ton of moves of late, but one of the most notable is the accumulation of Occidental Petroleum (NYSE:OXY) shares. For the first quarter of 2024, Buffett’s firm continued buying, snapping up around 4.3 million shares to the already sizeable position. More recently, a filing showed Buffett’s firm bought another 2.57 million shares of OXY stock in the first week of June 2024.
The rate of buying is remarkable, even if Berkshire has no plans to gobble up the entire firm. At writing, OXY stock has pulled back considerably from its 52-week highs hit back in April 2024.
Despite the Berkshire buying spree, OXY stock is down around 12% from this peak. Only time will tell if Buffett’s firm keeps buying more as shares sink lower. Either way, Occidental is a very well-run producer in the Permian Basin equipped to continue generating gushing cash flows, with or without the help of higher oil prices. At 14.4 times forward price-to-earnings (P/E), OXY stock has value written all over it.
Chevron (CVX)
Chevron (NYSE:CVX) is a long-time big oil holding of Berkshire’s. However, it’s one that the insurance giant has lightened up on this year, with Buffett’s empire reportedly selling 3.1 million shares of CVX in the first quarter of 2024. I’d mark the move as a slight trim rather than the start of any sort of selling spree. Of course, only the next big quarterly filing will tell.
In any case, CVX stock looks like a cheap way to gain exposure to one of the biggest and most efficient oil behemoths out there. The firm has also been making some smart acquisitions in the space, which could prove well-timed should oil’s rally still have legs.
Now down more than 17% from its two-year highs of $186 and change per share, CVX stock goes for 12.4 times forward P/E. With a 4.23% dividend yield and an extensive track record of dividend growth, Chevron stands out as the ultimate long-term holding. Perhaps the recent pullback is buyable, even if Buffett is inclined to take profits.
Berkshire Hathaway (BRK-B, BRK-A)
Finally, we have Berkshire Hathaway itself, which, while not an energy pure-play (not even close to it), is still a diversified way to indirectly benefit from the energy scene. Apart from the exposure to the stock portfolio’s exposure to Occidental Petroleum and Chevron, you’re also getting Berkshire Hathaway Energy and, of course, a pile of cash that could be used to scoop up cheap energy stocks (perhaps more OXY stock?) on weakness.
Berkshire Hathaway Energy is itself diversified, with exposure to numerous different types of projects. Whether we’re talking renewables (think wind, solar, hydro, and geothermal) or transmission, the division is poised to power significant cash flows for Berkshire for decades to come. Additionally, Greg Abel, the man at the top of Berkshire Hathaway Energy, is slated to be Warren Buffett’s eventual successor.
All considered, Berkshire is a great diversified investment for those seeking exposure to a broad range of industries, most notably insurance and energy.
On the date of publication, Joey Frenette held shares of Berkshire Hathaway. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.