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Occidental Petroleum (OXY): Buffett-Backed Value in a Volatile Oil Market

Writer's picture: DCAChampionDCAChampion

With oil prices stabilizing and Occidental Petroleum ($OXY) emerging as a leader in operational efficiency, the stage is set for long-term gains. Add Warren Buffett’s 28.8% stake, and you’ve got a story every investor should know. Is OXY the buy of 2025?

Introduction: Occidental Petroleum (NYSE: OXY) combines value, growth, and innovation, making it an intriguing choice for long-term investors. With a 2024 stock price of $46.50, operational improvements, and strategic initiatives like carbon management, OXY stands out in the energy sector. Let’s explore why this Buffett-backed company might be an ideal fit for Dollar Cost Averaging (DCA) investors.

Key Points


1. Market Context

  • Current Stock Price: $46.50

  • 52-Week Range: $42.00 - $66.00

  • Market Cap: $52.3 billion

Market sentiment remains cautiously optimistic as OXY navigates a year-to-date decline of -20.33%. However, Berkshire Hathaway’s ownership of 28.8% of OXY shares has provided confidence in the company’s long-term potential.


2. Financial Analysis

OXY’s valuation metrics and financial health signal potential undervaluation:

  • P/E Ratio: 12.7x, well below its 5-year average of 18.4x.

  • Price-to-Book Ratio: 1.43, reflecting a discount on assets.

  • Dividend Yield: 1.85%, with room for growth as debt reduces.


Q3 2024 Highlights:

  • Net Income: $964 million ($0.98 per share).

  • Operating Cash Flow: $3.8 billion, showing strong cash generation.

  • Debt Reduction: $4.0 billion in Q3, bringing the debt-to-equity ratio to 0.75.


3. Operational Performance

OXY’s operational improvements strengthen its position:

  • Production: 1.4 million barrels/day in Q3 2024, a company record.

  • Margins: Operating margins increased to 57.01% due to cost-efficient drilling.


4. Strategic Initiatives

  • CrownRock Acquisition: Boosting Permian Basin operations with successful integration and growth potential.

  • Carbon Management: Leadership in carbon capture technologies aligns with sustainability trends and opens new revenue streams.


5. Investment Thesis

Buffett’s Confidence:

  • Berkshire Hathaway’s 28.8% ownership signals belief in OXY’s undervaluation and long-term growth potential.

Undervaluation and Growth:

  • Trading below historical averages, OXY offers a potential value play. Operational efficiency and oil market stabilization could drive significant gains.


Dividend Growth:

  • With debt levels improving, OXY may increase dividends, enhancing shareholder returns.


6. Recommendations for DCA Strategy

  • Entry Points: Consider buying in the $45-$50 range, where technical support has been observed.

  • Long-Term Targets: A price recovery to $60-$70 appears plausible with operational success and market recovery.

  • DCA Approach: Spread purchases over time to mitigate volatility and average out the cost basis.


Conclusion/Big Picture: Occidental Petroleum offers a compelling mix of value, growth, and innovation, making it a strong candidate for long-term investment portfolios. With Buffett’s backing, operational improvements, and leadership in carbon management, OXY is well-positioned for 2025 and beyond.


Ready to dive into undervalued energy plays like Occidental Petroleum? Join us at DCAlpha.net for expert strategies and actionable market insights.

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