Insider transaction activity can help investors make better trading decisions. Insiders are some of the most informed participants in the market meaning their buying and selling activity can provide valuable trading signals.
In this report, we are going to highlight some interesting insider buying at Occidental Petroleum Corp (OXY: US). Occidental Petroleum is an American energy company that has operations in the US, the Middle East, Africa, and Latin America. The company, which has built a vast infrastructure of integrated energy assets around the world, operates through three reporting segments: oil and gas, chemical, and midstream and marketing. It is listed on the New York Stock Exchange and currently has a market capitalization of $56.6 billion.
Occidental Petroleum Corp: Insider Buying
Our data shows that between June 17 and July 1, 10% of shareholder Berkshire Hathaway (Warren Buffett’s investment company) added to its position in Occidental. In total, the investment company bought approximately 20.2 million shares, spending around $1.16 billion on OXY stock. This increased the firm’s holding to 163.4 million shares from 143.2 million shares.
Buffett Increases His Stake
What’s interesting about this insider trading activity is that Buffett has increased his stake significantly with these purchases. These trades have increased the size of his holding in Occidental by around 14.1% and taken his total stake in the company to 17.4%. At the current share price, Buffett’s stake is worth approximately $9.9 billion. That’s around 60% larger than that of the next largest shareholder, Vanguard, according to Refinitiv data.
It’s worth noting that this buying activity from Buffett has prompted speculation that he may eventually buy all of Occidental. In a recent research report, Truist Securities analyst Neal Dingmann said that he sees a "good chance" of a Berkshire takeover in the future (once Occidental achieves an investment-grade credit rating). Dingmann believes a purchase would help diversify Berkshire's energy portfolio.
Strong Cash Flows
Occidental continues to benefit from high energy prices.
In the first quarter of 2022, adjusted income attributable to common stockholders amounted to $2.12 per diluted share, up from $1.48 per share in the last quarter of 2021 and ahead of the consensus forecast of $2.03 per share. Meanwhile, cash flow from continuing operations was $3.2 billion versus $0.8 billion a year earlier.
As a result of the strong cash flows generated, the company was able to repay $3.3 billion of debt during the quarter, representing 12% of the total outstanding principal. It plans to cut debt to $20 billion in the short term.
Looking ahead, Occidental raised its production guidance for Q2 by about 6%. And President and CEO Vicki Hollub noted that the company had made good progress in preparing its operations to deliver increased barrels of oil and natural gas to the market for the remainder of the year.
In light of the momentum Occidental has right now, we see the insider buying here as a bullish indicator.