Should investors watch Warren Buffett's move as his Berkshire Hathaway (NYSE:BRKa) continues to buy more shares of Occidental Petroleum (NYSE:OXY)? According to Bank of America, the answer is "no".
The bank around its "neutral" stance on Occidental stock a Monday note to investors, setting a price target at $80, representing a potential upside $80. 12% of the current price.
"If [Buffett's holdings in] Occidental Petroleum represents a bullish view [on oil prices], there are other better oil stock options given the limited upside in Occidental stock price," BofA said. .
Buffett already owns more than 20% of the company's shares, and secured buying more shares, plus was approved to buy up to 50% of the company last week. While Buffett has not expressed intent to acquire the entire company through Berkshire Hathaway, that could change in the future.
But given the stock's limited potential upside, Buffett is likely to offer a share buyback price to gain control of the company, BofA said.
"Berkshire Hathaway's role as 'rate of change' may have been overlooked but indications that they may continue to squeeze short positions, with recent strong strong investment activity, risk The risk from now on is when Berkshire Hathaway ends up offering share repurchase prices," BofA said.
The bank successful investors that Buffett's oil bets weren't always, with him buying ConocoPhillips shortly before the 2008 stock market crash.
"This is not the first time Berkshire Hathaway has publicly bet on rising oil prices: but the results of their investments in oil companies have not always turned out well...
We recall there being a time. In the past, Berkshire Hathaway has publicly announced its holdings of a significant amount of oil as a demonstration of confidence in the bullish outlook for oil," BofA said.
In 2008, Berkshire Hathaway bought a 5.5% stake in ConocoPhillips before the company's stock price plummeted amid the economic downturn in oil prices.
Buffett admitted in his annual letter to shareholders: "... [L] Last year I made a big mistake ... under no pressure, I bought a large amount of ConocoPhillips stock. When oil and gas prices were nearing their peak, Buffett said: “I still believe there is a high probability that oil prices will be much higher in the future… but so far I have been wrong.”
"Our position is not to emphasize Berkshire Hathaway's mistake in investing in energy in 2008, which simply indicates that Berkshire Hathaway's investment in Occidental Petroleum in 2022 does not mean some insight into the future. uniqueness can foster differentiated market recognition of value," said BofA .
then, if an investor has a view that oil prices will continue to move higher, there are better oil stocks to invest in to back that view, according to BofA.
“Berkshire Hathaway will certainly continue to tighten its bullish short position, we still have other better oil stock options to invest in given factors like: rate of change, earning potential larger face with similar operating leverage and a more significant increase in value. On the contrary, we see a risk for Berkshire that there is a risk of re-introduction of the share buyback price," concludes BofA. .
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