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No, Berkshire Did Not Buy More Oxy
Despite widespread media reports to the contrary, Berkshire Hathaway did not buy any additional shares of Occidental Petroleum last week — and has not added to its position in more than a month
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Despite widespread media reports to the contrary, Berkshire Hathaway did not buy any additional shares of Occidental Petroleum last week — and has not added to its position in more than a month.
The confusion all started last Friday night when Berkshire filed a new Schedule 13G with the SEC pertaining to its ownership interest in Oxy.
Buffett and co. have been steadily snapping up shares of OXY 0.00%↑ since late February and, at last count, owned approximately 20.2% of the Houston-based oiler.
The 13G, though, stated that Berkshire owns 26.8% of the company — sparking the widespread (and erroneous) belief that it had bought more shares in the days leading up to the filing.
Understandable, but untrue.
On some level, I get why outlets like Bloomberg and the Wall Street Journal rushed out stories without double-checking the facts. If Berkshire bought another 5% of Oxy, that’s big news. And you’ve got to be quick to get the clicks.
Alas, all the hubbub and speculation proved to be for naught.
Everyone involved misinterpreted Berkshire’s filing and got this all wrong.
The answer lies right there in Berkshire’s 13G. Front and center for anyone willing to take the time to read the whole thing.
Hint: Check out what’s inside the parentheses on Row 9.
Basically, the amount of shares listed here (272+ million) includes Berkshire’s unexercised warrants from the Anadarko deal.
When Oxy needed $10 billion to acquire Anadarko in 2019, it was Berkshire that rode to the rescue. Buffett brokered a deal to buy 100,000 preferred shares of OXY 0.00%↑ that yield 8% annually, as well as warrants for 83 million more common shares at $59.62 a piece.
So, when Berkshire says it “owns” 26.8% of Oxy on Row 11, that includes those 83.8 million shares that Buffett hasn’t actually bought yet.
Row 11 clearly states that the percentage is based on the amount of shares listed on Row 9. And Row 9 clearly states — in parentheses — that the share count includes the unexercised warrants.
So, no new purchases by Berkshire.
Just one epic misread by the financial media.
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Setting all of that aside, though, it never made much sense that Berkshire would be a buyer last week. At least not based on Warren Buffett’s pattern up to this point.
As we’ve learned, Buffett pretty much stops buying at any price over $60 — and OXY 0.00%↑ spent all of last week trading well above that level.
Of course, things can change and maybe he will eventually decide to start paying a higher price for shares on the open market — but he’s been pretty consistent so far. When the price of Oxy veers north of $60, Buffett shuts up shop.
So something about those “Berkshire bought more Oxy” stories seemed off from the very start.
It was, presumably, an honest mistake — and an easy one to make — on the part of Bloomberg, the Wall Street Journal, and all the rest. And, to the WSJ’s credit, the paper quickly issued a correction and updated its story with the right information.
But, as The Rational Walk pointed out on Twitter, the damage had already been done:
Even after the WSJ correction, new stories kept popping up on Yahoo, Fortune, Fox Business, and elsewhere — all reporting that Berkshire had bought more shares of Oxy and now owned 26.8% of the company.
We’re now nearly a week in on this non-story and the incorrect info seems to still be spreading. Investors shouldn’t have to follow Berkshire as obsessively as some of us do in order to get accurate information.
That should be the job of the financial media.
Fingers crossed that we see some more corrections soon.
In other Berkshire news…
On Tuesday, Berkshire Hathaway Energy agreed to buy more than 2,000 acres in Jackson County, West Virginia, for a 100% renewable-powered industrial site.
Berkshire-owned Precision Castparts Corp. (PCC) — maker of complex metal parts for the aerospace biz — will operate a titanium melt there, with solar power coming from BHE.
Love to see that synergy between two Berkshire subsidiaries.
Products made at the new site will be used at PCC’s Timet facility in Ohio. “This facility will … be the primary metal melting facility that will ultimately feed that facility in Toronto, Ohio,” said Steven Wright, president of PCC Metals.
(I’ve lived in the Buckeye State all of my life and, until now, had never heard of Toronto, Ohio. I even had to Google it to make sure it’s real. It is.)
Okay, this isn’t exactly earth-shattering news for a company of Berkshire’s size.
But the story of how it came together provides a rare peek behind the curtain of how Warren Buffett and co. go about their business and make deals.
It all started when Glenn Jeffries, a West Virginia state senator, decided to reach out to nine U.S. billionaires — Buffett included — about investing in the state.
Jeffries had been driving back from a meeting at West Virginia University when he passed the shuttered Century Aluminum plant in Jackson County and started to dream about the site’s potential for revitalization.
“I started thinking about a letter just inviting investors to consider this great state,” he said. “One of those was Warren Buffett.”
“When I sent the letter to Mr. Buffett, I never expected him to even look at it.”
“I thought it would go straight into the trash can,” he said.
Two weeks later, though, Jeffries’s phone started ringing from a number associated with Berkshire Hathaway — and the wheels have been in motion ever since.
“I remember it was at 1:50 p.m. on a Thursday and when they told me they were interested in what we had to offer, I just fell to my knees.”
“I’ll be honest, I didn’t think I had much of a chance of the letter being read,” said Jeffries, “but I thought, ‘If we don’t try, we’ll never achieve anything.’”
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.