To The Moon

By the time you read this post, you would’ve learnt about $Berkshire Hathaway(BRK.A)$ annual meeting held last Sat, 06 May 2023 at the CHI Health Center located at Omaha, Nebraska.

Or maybe even watch the annual meeting proceedings where both legendary investors Mr Warren Buffet and Mr Charlie Munger kept a 30,000 attendees’ audience engaged for 5 hours over 2 sessions.

So much grounds have been covered that it warrants a 2nd, 3rd and even 4th watch of the day’s events to ensure that nothing has been missed out.

Funnily enough if you have taken the time (I did !) to read some Tiger members’ posts; everyone seemed to have touched on different excerpts of the annual meeting.

I am no exceptions.

One of the topics that stuck in my mind when I watched the annual meeting video playback was Mr Buffet’s decisive reply, rejecting speculation that Berkshire would buy Occidental after having accumulated a 23.6% stake in the oil company.

Background History

In 2019, Berkshire Hathaway invested US$10 Billion in preferred stock in $Occidental(OXY)$.

The funds injection helped Occidental to win a bidding war against $Chevron(CVX)$ and acquired Anadarko Petroleum, another major player in the Permian Basin, the top US shale oil region.

In return Berkshire Hathaway,

• Received warrants to buy up to 80 million shares of Occidental at an exercise price of $62.50 a share (last Fri closing price was $60.69).

• Opted to use “equity method of accounting” that permits it to record its proportionate share of Occidental's earnings with its own; potentially add billions of dollars of profit.

• Receives $800 Million in dividends annually for its 2019’s $10 Billion investment.

Taking into considerations, Berkshire Hathaway subsequent investment (after 2019) in Occidental Petroleum’s common stock; it owns another 23.9% of the oil company.

With a dividend of $0.04 per share (per quarter), dividend works out to be a little over $23.5 Million per quarter or $94 million per year.

In summary, dividend alone Berkshire Hathaway receives $894 Million annually from Occidental Petroleum.

What is there not to like, really.

"We will not be making any offer for Occidental" said Mr Buffet. "We got the right management". "Hollub is an extraordinary manager at Occidental," Buffett said. "We love having Vicki (Hollub) run it”.

Now we know why - right!

OXY share price as of Fri, 05 May 2023

• Occidental Petroleum was up +3.39% ($1.99) last Fri, 5 May to $60.69 per share.

• Its one-year performance is up +4.93% ($2.85).

• Its YTD (see above) performance is down -0.59% (-$0.36).

• Taking into considerations that oil prices are trending lower & lower since peaking in Jun 2022.

OXY Q1 2023 results out on Tue, 09 May 2023

Occidental Petroleum will be announcing its Q1 2023 quarterly earnings on Tue, 9 May 2023 after market closed.

From today (Mon, 8 May) until earning results are out tomorrow evening, I think market may adopt a cautionary stance towards Occidental.

Like its peers $Chevron(CVX)$ and $Exxon Mobil(XOM)$ who handed in an “excellent” report card (especially Exxon Mobil), the days that followed saw their stock prices rocketed.

Wouldn’t expect any less for Occidental Petroleum.

What is “worrying” is the drummed up socialization (see above) by Treasury Secretary, Ms Janet Yellen over the weekend (on different media platform) about US Debt Limit and its unresolved consequences.

To me, this will be the new “high” pressure build up that would affect US stock market performance minimally for this week.

• Do you think the US market will be up this week ? Or down ?

• Do you think Occidental Petroleum will hand in a stellar report card just like Exxon Mobil ?

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