OXY, Buffett, Hollub -- A Reply To A Reader's Question -- August 19, 2022

A reader sent comments, ideas, thoughts about OXY, Buffett, Hollub. 

I won't repeat the question but from my reply one can probably guess what the reader was asking.

My comments;

1. I've watched a fair amount of CNBC this week after getting back from Montana. I watch Jim Cramer from 7:45 to 9:00 a.m. every day. I occasionally watch his end-of-day 5:00 p.m. show.

2. I watch a fair amount of Fast Money with Melissa and a fair amount of the talk at noon.

3. Energy is talked about occasionally and only in a general way. Seldom do they talk about individual oil companies.

4. Investing in oil companies seems not to be of much importance to these guys.

5. So, to answer your first question: the OXY and Buffett  story is occurring in a vacuum. No one seems to care. You can see it today: oil companies were up but it was all because oil and natural gas were. OXY/Buffett news drove no new buying in oil sectors.

6. So, no I don't think what Buffett is doing with OXY is having any effect or will have much effect on traders/investors.

7. Oil has been the worst performer in the past 20 years; a lot of investors were burned by oil; and, no desire to get back in. In addition, "everybody" sees oil as a dead-end investment.

8. So, I thought that OXY / Buffett would make a deal, but it didn't and in retrospect, I'm not surprised. As noted earlier, Buffett / OXY is in occurring in a vacuum. It's nothing more than what it is. Oil companies are undervalued for a reason. Most folks see oil as a dead-end investment.

Second question. Buffett's plans.

1. Suggesting Buffett would let price run and then he would sell goes against everything I've known about Buffett. If he does that, it will be disappointing because that's not his style.

2. When he dumped Verizon the stories came back that when asked how long Buffett likes to hold his investments, he said "forever." He took forever to sell Verizon; he took forever to sell Wells Fargo. If he sells OXY it would be very out of character.

3. In addition, I thought I had recently posted this on the blog, maybe not. But I did back in July, 2022 (https://themilliondollarway.blogspot.com/2022/08/berkshire-hathaway-continues-to.html).

4. I am convinced that Warren Buffett and Vicki Hollub have formed a very, very close financial relationship. They have probably bonded very, very closely. Oh, yes, here it is, from the blog from the other day:

I was too young by the time Warren Buffett had made his mark as an investor but after I turned 27 years old, or something like, I started following him.

These are his milestones -- three --  that put him alone in the investing pantheon (of gods).

• buying BNSF: up until then, one could argue that BRK was a mutual fund with a lot of wholly-owned smaller companies but nothing like BNSF; Buffett said he "bet his company" on BNSF
• taking his stake in AAPL, despite being late to the party;
• his financial relationship with Vicki Holub

5. I think both would like to do one last big deal. He has run out of time; he has no time to do one more deal as big as BNSF or AAPL.

6. Vicki Hollub has had a great run with OXY. She would still run the company but would have access to huge amounts of capital (borrowed from BRK) for CAPEX.

Bottom line:

1. I don't see traders / investors being swayed at all by OXY / Buffett. No one seems to be talking about it except the headlines today.

2. I don't see new traders coming into oil based on this story.

3. Current investors in oil and gas have already made their decisions where they want to invest. OXY/Buffett won't change their thinking.

4. It would be out of character for Buffett to sell a huge investment like OXY with its great returns likely to continue.

Note not proofread. My keyboard has a lot of "sticky" keys so there tends to be more typographical errors than usual.