4 Reasons This Company is Warren Buffett’s Favorite Stock Right Now

The Oracle of Omaha has developed quite the appetite for one stock. Why is this?
Updated May 1, 2024
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Warren Buffett is one of the world’s richest people, and widely considered to be among the best investors of all time. So, it’s no wonder that eager investors closely watch his every trading move.

Those who are paying attention are bound to notice that Buffett’s company, Berkshire Hathaway, has been buying up a lot of one stock in particular lately — Occidental Petroleum (NYSE: OXY).

Buffett made news earlier this year because Berkshire owned around 20% of Occidental Petroleum. Berkshire has recently gotten permission to own up to 50% of Occidental, and even added to his position earlier this week.

While we can’t claim to be inside the head of a billionaire, we can offer a few educated guesses as to what’s attracting Buffett to this particular stock. And perhaps these insights will help you think about what you should do with your own money.

Energy companies are a favorite of Buffett

dgdimension/Adobe petroleum engineers with laptop and blueprint

Taking a chance on an energy company is not out of character for Buffett.

Buffett's Berkshire Hathaway has been investing in fossil fuel companies for years and it doesn’t seem like he’s changing his tune anytime soon. For example, Berkshire Hathaway owns a lot of shares in fossil-fuel giant Chevron (NYSE: CVX).

As climate change continues and much of the discourse focuses on renewable energy, it’s clear that Buffett still believes fossil fuels have us firmly in their grasp.

Incidentally, Occidental says it plans to reach net-zero emissions on its operational and energy use by 2040, or possibly earlier.

Occidental Petroleum is profitable

piter2121/Adobe smartphone displaying logo of Occidental Petroleum

One of the ways that Buffett makes successful investment decisions is by going after stocks with prices that are lower than they should be. When looking for a company to invest in, he not only looks at current profitability, but also looks at historical profitability.

Occidental Petroleum has been a very profitable company. In the first quarter of 2022 alone, the company made a profit of $4.7 billion.

Buffett is well-known for investing in some of the most profitable companies in the world, like Apple and Coca-Cola.

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Buffett knows how to choose inflation-friendly stocks

sofiko14/Adobe  bearded guy in stylish casual outfit refueling his luxury car

Inflation causes consumers to rein in spending, and that can hurt some stocks. When consumer power is weaker, many companies become less profitable.

Instead of shying away from investments, seasoned professional investors like Buffett look to inflation-friendly stocks they can invest in to help protect and even grow their portfolios.

Buffett is not alone in seeing energy stocks as one of the safest investments during times of high inflation. Energy is a commodity sector that can do well no matter how tight money is, because consumers have to pay for gas to drive their cars and heat to warm their homes.

Buffett has a rapport with the Occidental Petroleum CEO

ronstik/Adobe businessmen handshake

Buffett’s faith in Occidental Petroleum is not just a result of his belief in the continued relevance of fossil fuels. It was also spurred by the performance of Vicki Hollub, Occidental’s CEO.

Hollub, who is a mineral engineer by trade, famously impressed Buffett with her management style. After reading a transcript of an earnings recap from the company, Buffett remarked on how impressed he was by Hollub’s work, saying that what she was doing as CEO was “exactly what I’d be doing.”

Bottom line

Blue Planet Studio/Adobe stock market data chart analysis by ingenious computer software

You don’t need to be a billionaire to channel Buffett’s investment energy. To follow in his footsteps, choose stocks wisely and try not to get pulled into market trends.

We might not all understand why Buffett is investing so much in one company like Occidental Petroleum — but he sure does, and that’s what matters.

Fully understanding the rationale behind your own investment decisions can improve your odds of moving beyond living paycheck to paycheck as you build lasting wealth.


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Author Details

Rachel Cribby Rachel Cribby is a personal finance writer from Canada. Once a terrible math student with a fear of numbers, Rachel has embraced the world of personal finance and is passionate about empowering others to do the same. She especially loves taking topics that seem complicated and boring and making them interesting and easy to understand.

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