Recently, Warren Buffett’s Berkshire Hathaway bought 18.1 million shares of Occidental Petroleum Corp., the US oil giant.
There is an interesting investment case study behind this. This is how…
Berkshire Hathaway Buffett now owns nearly a 15% stake in the company and now ranks 8th in its largest shareholding. Interestingly, Buffett also has a $ 6 billion stake in Chevron, another oil giant.
Clearly, Buffett’s energy bet is confusing. Especially against the backdrop of a world that will be powered by green energy. Does Buffett not believe in the concept of reducing carbon emissions or are we missing something?
Fortunately for us, Buffett was asked the same question at last year’s Berkshire AGM. This is what he said.
“I would say that people who go beyond both sides are pretty crazy. I don’t like all hydrocarbons being banned in three years, or you don’t want the world, it’s not going to work. And on the other hand, what happens will be adjusted, from over time, just as we have adapted it to all sorts of things. “
That’s a very rational answer in my view, something you’d expect from a legend like Buffett.
Buffett argues that you can’t have a hydrocarbon -free world in three years. Similarly, green energy may not be the dominant source in a few years. The transition will take time.
So, if investors are skeptical of green energy stocks and give them crazy multiples, you should stay away from those stocks.
Similarly, if an investor becomes negative about an energy stock and throws it to a point where it becomes an attractive valuation, you can consider investing in it.
This is exactly what happened to Occidental Petroleum. So Buffett saw an opportunity and grabbed the company’s stock.
The way stocks like ONGC and Oil India have moved over the past few months, it looks like Buffett’s mantra will be effective in India as well.
By the way, Joint Head of Research at Equitymaster Rahul Shah shared this update on his Telegram channel today.
Be a part of Rahul’s journey as he shares ideas that could potentially accelerate your profits. Join Rahul Telegram Channel – Accelerated Profits.
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