Billionaire Warren Buffet, also known as the legendary Oracle of Omaha, is probably the most important investor in the world for those interested in making money in the market to keep both eyes on, as he has a penchant for picking big winners. Thus, when he makes a big move, like the two new stocks he’s betting on, it’s critical to analyze what he’s doing and the companies he’s wanting to get a piece of.
According to The Motley Fool, Buffet’s firm, Berkshire Hathaway, has over $29 billion of its portfolio poured into two very similar, related stocks. One is oil company Chevron, which is in the firm’s fifth-largest position. The other, Occidental Petroleum, is just one spot behind Chevron.
Buffett continues to scoop up shares of Chevron and Occidental. In the fourth quarter of 2023, he purchased only three stocks for Berkshire’s portfolio. Both of these oil stocks were in the group. The obvious question is: Why?
Perhaps Buffett expects that oil prices will rise soon. Even if he does, though, I don’t think that’s the primary reason behind the aggressive buying of Chevron and Occidental. While Buffett’s nickname is “the Oracle of Omaha,” he knows he can’t predict the future. He stated as much in his latest letter to Berkshire Hathaway shareholders, writing: “No one knows what oil prices will do over the next month, year, or decade.”
Buffett is instead making a calculated bet on two things with his investments in Chevron and Oxy. First, he believes the demand for oil and gas will remain strong despite the increased use of renewable energy. Second, he thinks that carbon capture technology could be a game-changer. The former isn’t a once-in-a-generation wager, but the latter is.
The real question on your mind is likely how much money could these big gambles make Buffet and potentially anyone else who invests in them? Well, in order to ascertain that bit of information, you have to understand the idea that exists behind carbon captures, which is that emissions of carbon dioxide can be, well, captured — duh — and then stored. Why would people want to save up these emissions? Because they can be injected into oil fields to help enhance their oil recovery. That’s just one. There are actually quite a few others.
Occidental has trumpeted its investments in carbon capture and storage technology. In particular, the company is focusing on direct air capture, an approach where carbon dioxide is sucked from the atmosphere. Chevron is also investing heavily in carbon capture. The giant oil and gas producer hopes to capture 25 million metric tons of carbon dioxide annually by the end of this decade.
“ExxonMobil projects that carbon capture and storage could be a $4 trillion business by 2050. Companies in industries such as cement production (the second-largest carbon dioxide emitter in the world) could pay big bucks to have their carbon emissions captured and stored underground,” the report went on to reveal.
However, for oil companies, there’s an even bigger reward, which is to keep the doors open today, tomorrow, and nigh unto eternity. That’s called job security for you young folk who might be new to the work force. Vicki Hollub, who is the CEO of Occidental wants to create and sell an oil product with net-zero carbon emissions.
In an interview with NPR last year, Hollub said, “If it’s produced in the way I’m talking about, there’s no reason not to produce oil and gas forever.”
I know what you’re thinking now. Should you invest in some stock of Chevron and Occidental? Well, before you plunk down the cash that you’ve shed sweat, blood, and tears to earn down on these two companies, you should understand that the technology to do carbon capture has not yet been 100 percent proven. It’s entirely possible, as the Motley Fool points out, that carbon capture won’t be able to scale the way it is needed in order to transform into the multi-trillion-dollar market that ExxonMobil says it’s going to be.
However, having said that, both Chevron and Occidental are already great stocks for you to invest in if you are willing to take a risk on carbon capture. The fact that oil prices are also on the up and up will push the stock of both companies even higher over the next couple of years.