Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 1
No. of Recommendations: 17
Berkshire now holds Oxy shares 255,281,524, plus 83,858,848.81 from the warrants, total 339.1m, Oxy has 886.6m shares outstanding, so Berkshire would have (255,281,524+83,858,848.81)/(886,640,000+83,858,848.81) = 35.1% when the warrants are converted.
I know Buffett has said he doesn't want to buy Oxy outright, but I can't think of another example where he has kept buying up to a percentage in the mid-30s, and this number will keep climbing even if Buffett stops buying, as the Oxy is buying back a lot of shares too (share count down about 30 million shares since a year ago).
The scale of these Oxy share purchases is interesting: about a million shares a day for the last 3 days, or $60m worth. In the last 3 years, Berkshire's operating earnings have been $27.6 billion for 2021; $30.9 billion for 2022 and $37.4 billion for 2023 (from p.4 of the annual report). Even if Berkshire bought $60m worth of Oxy every day of the year, with 250 trading days in a year, that would be only $1.5b. So to sop up all that cash flowing in, we would need about 20 Occidentals getting $1.5b each, including capital reinvestment in existing companies like BNSF and BH Energy. And if he stops when he gets to 50% of Oxy, that means he can only buy another 15%, or 145m shares. At a million shares a day, he would have to stop in about 7 months, and find something else to pour $1.5b a year into.
Dtb
No. of Recommendations: 7
Even if Berkshire bought $60m worth of Oxy every day of the year, with 250 trading days in a year, that would be only $1.5b.
Seems like you are missing a zero there
No. of Recommendations: 2
No. of Recommendations: 2
Even if Berkshire bought $60m worth of Oxy every day of the year, with 250 trading days in a year, that would be only $1.5b.
....
Seems like you are missing a zero there
You're right, a million shares a day for 250 days would be $15b, not $1.5b. The whole market cap of Occidental is $54b, so $15b more would be another 28%; if he stops at 15% more (for a total of 50% of the company), that would be 7 more months at this rate.
So I got the time limit right, but in fact the $15b a year pace would sop up almost half of Berkshire's operating earnings, so there's hope Buffett could find alternatives!
dtb
No. of Recommendations: 2
NOLA622 (or anyone)
First thanks for the useful details on recent OXY purchases.
Next, has anyone kept track of the purchases (ignoring sales during the pandemic) and calculated an average price per share?
I ask because this would save me a bunch of transcribing to Excel the data NOLa622 has shared.
My interest is how well has OXY actually performed with respect to Chevron, and even ExxonMobil?
They are somewhat different companies than OXY in that CVX also has more O&G worldwide investments than OXY - plus refining and some petrochemicals. XOM the same - but more so. Much larger in what most call downstream and especially petrochemicals. So I view OXY as a more focused investment on O&G, and especially the Permian. As Buffett has said, a bet on oil prices - a purer play than an O&G industry investment.
So I want to compare how this has worked out so far.
Any help appreciated before I start typing a lot of data - and probably don't have it all.
Tex
No. of Recommendations: 3
If you are looking to find out what return Berkshire has earned on their OXY common stock - the position is about flat.
No. of Recommendations: 9
has anyone kept track of the purchases (ignoring sales during the pandemic) and calculated an average price per share?
Though certainly a useful number to know, unlike some holdings a simple average price per share isn't a great guide to how well they have done so far. I think in the case of Berkshire's investment, you'd want to include all the moving parts, which gets complicated very quickly.
* The dividends are not inconsequential since March 2022, so you'd also want to estimate the after-tax dividends received to date.
* Add the after-tax benefit of the 8% interest on the preferred to date
* The in-the-money mark-to-market profit on the warrants, less a tax provision
* The premium received on the fraction of preferred stock that was redeemed to date
* The time-weighted amount of money put at risk to date: e.g., some recent purchases are profitable despite tying up money for only a few days, and the cost to exercise the warrants has not yet been disbursed.
Messy.
Jim
No. of Recommendations: 1
Though certainly a useful number to know, unlike some holdings a simple average price per share isn't a great guide to how well they have done so far. I think in the case of Berkshire's investment, you'd want to include all the moving parts, which gets complicated very quickly.
* The dividends are not inconsequential since March 2022, so you'd also want to estimate the after-tax dividends received to date.
* Add the after-tax benefit of the 8% interest on the preferred to date
* The in-the-money mark-to-market profit on the warrants, less a tax provision
* The premium received on the fraction of preferred stock that was redeemed to date
* The time-weighted amount of money put at risk to date: e.g., some recent purchases are profitable despite tying up money for only a few days, and the cost to exercise the warrants has not yet been disbursed.
Yes, it would be a complicated spreadsheet.
But if someone wants to do it, note also that Occidental has repurchased about 12% of Berkshire's $10b worth of preferred shares, at a 10% premium, as they are obliged to do if they pay more than $4 per share in dividends in any given year, in an amount matching the excess above $4.
I'm guessing that this investment, as with most Berkshire investments, has underperformed the S&P in the last few years, probably by a pretty wide margin. The S&P 500 was under 3000 in August 2019, and it's now bumping up against 5500. Occidental was at about $42 on the initial purchase of the preferred shares, and has been at around $60 for 2 years now. But there was a 2-year period, roughly March 2020 to January 2022, when Occidental shares could be had for under $30, and as low as $20. Buffett unfortunately didn't buy any during this time, but did start buying ordinary shares in Q1 of 2022, buying 136m shares, half the current position, at prices somewhere between $33 and $60, so you never know.
Note 5 (p. K-86) of this year's annual report indicates that the carrying value of the Occidental stake, on Dec 31st, was $15.4b, whereas the fair value was $14.6b, and that, in its opinion, "the recognition of impairment charges in earnings were [sic] not required." My understanding of this is that this means the investment is actually underwater. Is that correct? If so, no need for complicated calculations to conclude that, so far, this investment is underperforming.
dtb
No. of Recommendations: 5
Note 5 (p. K-86) of this year's annual report indicates that the carrying value of the Occidental stake, on Dec 31st, was $15.4b, whereas the fair value was $14.6b, and that, in its opinion, "the recognition of impairment charges in earnings were [sic] not required." My understanding of this is that this means the investment is actually underwater. Is that correct? If so, no need for complicated calculations to conclude that, so far, this investment is underperforming.
Certainly relative to the S&P it's likely a laggard in aggregate so far. And yes, the Occidental was 6% underwater at year end, and probably similar now since the stock is pretty flat year to date. But FWIW that 6% figure and the note about the impairment test are related to the common shares only.
Jim
No. of Recommendations: 2
Certainly relative to the S&P it's likely a laggard in aggregate so far. And yes, the Occidental was 6% underwater at year end, and probably similar now since the stock is pretty flat year to date. But FWIW that 6% figure and the note about the impairment test are related to the common shares only.
Yeah, the preferred shares at least get the 8% annual dividend plus a one-time 10% when they're cashed out. The warrants are currently at about breakeven, but they still have a lot of option value, valued at about $1.8b (or 18% of the initial 2019 investment) as of the end of 2023. And the bigger investment, the underwater common shares, at least get the roughly 1.5% annual dividend yield, so they're probably close to breaking even. But we're a long long way from the S&P which is up from about 2900 to 5500 in the same time frame, plus roughly 1.3% annual in dividends.
dtb
No. of Recommendations: 5
Messy.
Very messy Jim, for all the reasons you cite.
However, while difficult to pin down the exact numbers, a stockcharts performance graph of OXY versus CVX, and especially XOM, indicates that you had to buy OXY when everyone thought they might go bankrupt when O&G crashed during the pandemic for it to have outperformed. Those were the times when Buffett was selling OXY stock received as dividends as quickly as he obtained them. Oxy was saved by the success of the vaccinations. Otherwise debt would have crushed them. Since then, as nola622 shares, it looks awful flat. That includes dividends, but not the income from the preferred shares, etc.
I have no doubts that Buffett understands the financial aspects of O&G. I'm less sure he understands the industry.
I'm just trying to put numbers behind my gross observations. It is very complicated.
No. of Recommendations: 2
Rational Walk has a spreadsheet of OXY purchases. You can try contacting him to get the latest updated version.
https://rationalwalk.com/buffett-resumes-occidenta...Rational Walk also maintains a spreadsheet of all BRK share repurchases which he discusses occasionally.
No. of Recommendations: 11
I'm just trying to put numbers behind my gross observations. It is very complicated.Here are some numbers for your spreadsheet, if the link works:
https://substackcdn.com/image/fetch/f_auto,q_auto:...It's a running tally of Berkshire purchases of Occidental stock, by date, with an estimate of the price, by Rational Walk who occasionally posts here.
He concludes that there have been about 7 million shares purchased in June, bringing the total to 255,281,524, at an average price of $54.39, for a total gain of $1.753b on a total (share) investment of $13.886b.
I don't believe you will ever get the complete details of exactly what date all the shares were purchased on, so it would be difficult to know exactly how many dividends have been collected, but a rough approximation would be to say that the first purchase (130m shares) was in Q1, 2022, with very roughly 15m more shares every quarter since then, for 255m now. Dividends have gone from 13c to 18c to 22c now, say an average of 13+13+18+18+18+18+22+22=1.42 for the first 135m and maybe 80c on average for the more recent 120m shares, so that would be 135*1.42 + 120*0.80 = 288m. That would bring the total gains to $1.753b + 0.288b = $2.041b, for capital invested for an average of about 18 months. That would be 14.7% in 18 months, or or 1.14698^(12/18)-1 = 9.6% annualized.
It's actually much better than I thought. This does seem to contradict the fact that fair value is listed at LESS than carrying value in the annual report, so maybe I've made a mistake, either in my calculations or in my understanding of the annual report. The small difference between the Dec 31st stock price ($59.27) and the close yesterday ($61.26) plus 2 $0.22 dividendsisn't enough to explain the difference, which would be about 255m*(1.99+.44) or $620m, about 4.5%.
That said, I still like this investment, as long as you believe, like Buffett and Hollub and OPEC+, that we are heading for a tight oil market, and not, like the IEA report this week, that we will have glut of oil as demand peaks in 2029, with a boom in renewable power booms and electrification of transportation (
https://www.businesslive.co.za/bd/world/2024-06-12...).
Place your bets!
DTB
No. of Recommendations: 2
It seems that there are often 3 days reported, and I guess it is because the SEC says that " Form 4 must be filed within two business days following the transaction date." That means that if I am an insider and I buy shares on June 13, 14 and 17, I can report the June 13 transactions on June 17, probably after hours, so I can get 3 days in, revealing the minimum of information, and this seems to be what Berkshire has done.
Shares closed on June 17 at $60.20, and jumped up to $61.03, on June 18, perhaps as a result of the aforementioned Form 4, or for some other reason, and stayed above $61 for most of the day and closed there. June 19 was a holiday, and today, shares have been above $62 from almost the beginning of the day.
We will see if there is another Form 4 tomorrow, reporting June 18, 20 and 21. If not, we could surmise that $60 is ok but above $61 is too high. My guess is, no Form 4 Friday.
dtb
No. of Recommendations: 6
Don’t attribute all the price action to Buffett. Oil futures have gone from $78 to over $82 in the last 5 days. All oil producers are up, not just OXY.
All the buying by Buffett over the last year has had very little impact on OXY share prices. The oil prices and OXY’s acquisition of Crown Rock have been bigger contributors.
