Billionaire’s recently disclosed stake in a big oil producer doesn’t automatically make it a buy, Real Money Columnist Stephen ‘Sarge’ Guilfoyle argues.
Warren Buffett’s Berkshire Hathaway BRK.A BRK.B recently disclosed a big stake in an oil producer.
But notwithstanding the famed investor’s move, that doesn’t make the stock an automatic must have, Real Money Columnist Stephen “Sarge” Guilfoyle argues.
Attention is always drawn whenever Warren Buffett adds a stock to Berkshire Hathaway (BRK.A) (BRK.B). The conglomerate bought a 10% stake in Occidental Petroleum recently, according to SEC filings. Berkshire bought $3 billion worth of OXY at prices ranging from $47.07 to $56.45.
Berkshire owns a total of 91 million shares along with 84 million in warrants associated with the funds the conglomerate gave to Occidental to facilitate its Anadarko purchase, plus another 100,000 in preferred shares. The entire 10% stake is valued at an estimated $5 billion.
“I don’t see OXY as a poor stock to be in,” Guilfoyle wrote in a recent Real Money column. “I understand that investors need to be involved in U.S. focused energy producers.”
However, Guilfoyle notes, he has been pointing readers towards “APA Corp (APA) – Get APA Corp. Report , and to a lesser degree… Chevron (CVX) – Get Chevron Corporation Report , Hess Corp (HES) – Get Hess Corporation Report, and Civitas Resources (CIVI) . I would not swap out any of my names for OXY at this time, as I think I have a nice mix of upstream, transport, and downstream operations, with a focus on U.S. production of WTI Crude and natural gas.”
Occidental’s debt levels are too high even though the company can pay its short to medium term obligations easily, Guilfoyle wrote. Over the past nine consecutive quarters, the company’s long-term debt of $29.36 billion has been knocked down from a high of $48.39 billion in September of 2019.
Right now the company’s assets of $75.03 billion outweigh total liabilities less common and preferred equity of $54.70 billion.
“This balance sheet does pass the Sarge test, but debt remains a bit high for my comfort,” he wrote.
