Berkshire Hathaway (BRK-A), a major holder of Occidental Petroleum (OXY), continues to accumulate shares. Last week saw a 2,137,250 share buy, valued at $122.1 million.
That’s the first buy in nearly a month, following multiple buys in May. Berkshire, run by Warren Buffett, now owns over 25 percent of the oil company, and has permission from regulators to buy up to 50 percent of shares.
Company insiders own 0.2 percent of shares, and institutions like Berkshire own over 82 percent of the company.
Occidental shares are about flat over the past year. That’s underperformed the S&P 500 by about 15 percent, as energy prices have been trending down. Lower prices have led to a revenue decline of about 14 percent, and earnings are slightly down.
Action to take: Like many energy stocks, valuation is still inexpensive with the recent decline in oil prices. Occidental trades for about 11 times forward earnings. And it pays a 1.3 percent dividend, a bit on the low side among the oil majors.
For traders, shares have been rangebound over the past year. When shares drop into the high $50 range and Berkshire starts to buy, shares tend to bounce a bit higher. The September $62.50 calls, last going for about $1.80, could see mid-double-digit returns in the coming weeks. Traders may want to take quick profits well before the option expires.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.