OXY another 900K shares

Just over 900,000 shares of OXY at $57.34 bought.

https://www.dataroma.com/m/stock.php?sym=OXY

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I think with the warrants Berkshire owns 25%

I still think a buyout at $75 is coming.

From Andrew Bary, Barron’s

The additional purchases may fuel speculation that Berkshire, headed by CEO Warren Buffett, will add further to its stake and reach 20%, or potentially bid for the entire company. At 20%, Berkshire likely would get a different accounting treatment for Occidental that would let it reflect a proportional share of Occidental’s earnings in its own results.

https://www.barrons.com/articles/warren-buffett-berkshire-ha…

I doubt that an accounting treatment would influence Buffett’s decision. However a lower tax rate on dividends might.

A US corporation generally may deduct 50% of dividends received from other US corporations in determining taxable income. The dividends received deduction (DRD) is increased from 50% to 65% if the recipient of the dividend distribution owns at least 20% but less than 80% of the distributing corporation.

https://taxsummaries.pwc.com/united-states/corporate/income-…

But he might just consider buying the whole company. He likes the management and he seems to love the business currently. Market Cap is 50B and Net Debt 25B. And BRK already owns 15% without counting the warrants. So he could easily buy the whole company, pay down the debt and keep all the free cash flow.

I don’t think he is planning on doing it, otherwise he would not have bought 9% of Chevron, an OXY competitor.

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I don’t think he is planning on doing it (buying all of OXY), otherwise he would not have bought 9% of Chevron, an OXY competitor.

That’s my view also.

Buffett historically doesn’t like capital intensive, cyclical, businesses. He has bought such in BHE and BNSF - but both are largely regulated industries where is he assured of an acceptable return.

The O&G industry is anything but that.

Continuing on, Buffett described his initial investment in OXY as a play on oil prices. That seems to fit with his Chevron purchase as well. I do think the reduction in dividend taxes is a significant factor in increasing his OXY ownership - he sees rapid growth coming in dividends, at least for a while, and he loves buybacks. But both remain liquid stocks so he can reverse his positions in the future if he sees the oil price outlook changing. Not so if he buys all of OXY.

Just the reasons behind my view.

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The thing about buying the whole company, no incentive for current management to sell. David Rolfe has highlighted this beautifully. Vicki Hollub, has upside currently. Buffett will not give shares, unless he really wants the company- he could always repurchase them, I guess.

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Buffett historically doesn’t like capital intensive, cyclical, businesses. He has bought such in BHE and BNSF - but both are largely regulated industries where is he assured of an acceptable return.

The O&G industry is anything but that.

His past investments in Airlines doesn’t align with the above.

Buffett described his initial investment in OXY as a play on oil prices.

I’ve got to say I’m surprised buy all the oil purchases. Years ago my uncle Warren explained to me that oil stocks just followed oil prices, and if you really know where oil prices are headed, you ought to just buy futures.

I have seen major oil companies, with all their expertise and resources, fail miserably in their oil price projections. I do know there is a lot of oil available to be produced at these prices but we are not seeing the somewhat reckless capital investment we have had in the recent past. No one knows where this war is heading.

I sold most of my oil stocks recently and a partnership I worked in is selling off our producing properties I feel very good with the results and timing, but now BRK has me hoping it was premature!

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