Warren Buffett's favorite oil stock is enjoying a strong rally today, and it's one of several signs that the Oracle of Omaha's luck could be shifting.
Warren Buffett has seen more cycles play out in the stock market than most of your favorite traders combined.
And yet, a cocky new generation has deemed the Oracle of Omaha a relic of the past. He’s no longer relevant in this corona-stricken landscape.
Buffett has too much cash on the sidelines, they say.
He’s re-upping his investment in oil?
Today, he’s showing us why.
In January, Buffett’s big oil bet, Occidental Petroleum, was approaching $48 per share. Two months, and an economic shutdown, later, it was crawling along at $10 a pop.
He lost a massive amount of money and continued to sit on the sidelines.
Analysts wondered if Warren Buffett had lost his touch. Some traders, like Dave Portnoy, claimed they were smarter than him.
Then in mid-April, Berkshire Hathway purchased 17 million more shares of OXY, and analysts were confounded.
Today, Occidental Petroleum is the S&P 500’s top performer.
It’s rocketed up over 10% so far on the day.
It’s up over 20% from Buffett’s April purchase.
Oil prices, and demand, will need to keep rising for companies like Occidental Petroleum to build a sustained rally, but this is a start.
And it’s not Buffett’s only recent win.
Warren Buffett is rumored to have bought back $5 billion in shares of Berkshire Hathaway.
While companies have been buying back their own shares at all-time highs, Buffett (allegedly) bought back at a steep discount.
Sure, he’s lost more money this year than almost anybody. But, as the stock market continues to rise against all odds, it’s important to note that Buffett has historically underperformed in bull markets.
He’s also lying in wait with that massive $130+ billion cash pile.
If the stock market comes to its senses and begins to reflect the damages to the real economy, then Warren Buffett will be ready to pounce on the steep discounts.
Until then, enjoy the Dave Portnoys of the world.