Buffett Buys More Occidental Petroleum—Sticking to His Playbook After a recent episode of volatility in the stock market, there is one clear sign of where opportunities may still lie for investors.
This story originally appeared on MarketBeat
In the world of indicator purgatory, where investors load up their screens with dozens of different indicators that end up making so much noise that no real signals are given, one simple gauge can be followed for an accurate assessment of the stock market. That indicator is found in buying and selling activity from professionals, but not just any professional this time.
Warren Buffett, responsible for Berkshire Hathaway Inc. (NYSE: BRK.B)'s holdings, has decided to continue on his course to focus on the value stocks (there are few of them) found in today’s market. These are harder to find because the S&P 500 now trades near its all-time high, leaving discounts in the dust, but that’s what makes following Buffett’s activities so powerful.
This time around, there is a clear indication that Buffett might be aware of the cyclically low level of the iShares S&P 500 Value ETF (NYSEARCA: IVE) and the iShares S&P 500 Growth ETF (NYSEARCA: IVW), meaning that value stocks in general could start to outperform other growth names, such as the technology sector, in the coming months. Buffett’s choice? More of Occidental Petroleum Co. (NYSE: OXY).
What is Buffett Trying to Tell You
Apart from the fact that investors should be watchful of this value to growth spread, Buffett’s recent activity also says a lot about the energy sector. Out of all potential deals in the market, Buffett has chosen to go with energy, though it makes sense after Goldman Sachs analysts decided to recommend the commodity in their 2025 macro outlook report.
More than that, Paul Tudor Jones also said that the risk-to-reward in oil is unbelievable during a recent CNBC interview. With more of Wall Street’s attention turning to oil and oil stocks, it is clear that Warren Buffett is right again, but that’s not the only lesson investors can take away from this.
He also decided to trim some of this former darling, which is Apple Inc. (NASDAQ: AAPL). This decision came in wonderful timing. His selling preceded the declines in other technology names during their first quarter 2025 earnings announcements, as seen in the charts for Amazon.com Inc. (NASDAQ: AMZN) or Alphabet Inc. (NASDAQ: GOOGL).
Now, after breaking down two of Buffett's latest decisions, the trend out of growth and into value should start to make more sense for investors. However, there are a couple more factors that investors should consider before considering following Buffett in his recent buying spree for Occidental Petroleum stock.
Why Occidental Petroleum?
Buying over 700 thousand shares of stock is not something to be taken lightly, especially as Buffett now owns over 28% of the entire company. To clear it all up, here are some factors that investors can keep in mind moving forward in case more volatility decides to embrace the stock.
Knowing that they are fighting the biggest value investing legend on Wall Street, short sellers decided to close some of their positions over the past month. This can be seen in the 4.9% decline in short interest for Occidental Petroleum, a clear sign of bearish capitulation.
But Buffett wasn’t the only one who decided to come in and replace some of these bears who took off; institutional buyers from the Vanguard Group boosted their holdings in Occidental Petroleum stock by as much as 18.1% as of February 2025, bringing their net position to a high of $3.4 billion, or 7.3% ownership in the company.
With more buyers circling the stock, it would make sense for investors to start considering the upside versus the downside. At 68% of its 52-week high, Occidental Petroleum looks like it offers very little of one but a ton of the other.
Analysts at Mizuho share that view, keeping their price targets above the consensus despite recent stock declines. As of December 2024, their valuations for Occidental Petroleum stock were kept at $70 per share, which would mean not only grasping the stock’s 52-week high but an implied rally of as much as 46.4% from today’s low price.
Ultimately, here’s where value investors can really celebrate. Occidental Petroleum stock now trades at a price-to-book (P/B) of only 1.9x, which is a steep discount to the rest of the energy sector’s 4.3x average valuation today. This gives investors a risk-to-reward setup that would let them escape any volatility during the rotation out of growth and into value.
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