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Warren Buffett's Bet on OXY Signals Rosy Energy Outlook: 3 Picks
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Late last month, legendary investor Warren Buffett’s company Berkshire Hathaway Inc. (BRK.B - Free Report) further boosted its stake in Occidental Petroleum Corporation (OXY - Free Report) amid its falling share prices. This is thereby widening Berkshire Hathaway’s lead as the largest shareholder in Occidental.
The bet on the oil and gas major signals a bullish outlook for the energy sector as a whole. Thus, energy players like Oceaneering International, Inc. (OII - Free Report) , Ecopetrol S.A. (EC - Free Report) and Battalion Oil Corporation (BATL - Free Report) are well-poised to gain.
Berkshire Hathaway Lifts OXY Stake
Berkshire Hathaway recently announced in its filing with the Securities and Exchange Commission that it has increased its stake in Occidental to more than 25%. Berkshire Hathaway bought 2.14 million more Occidental shares for $122.1 million. This makes the Omaha, NE-headquartered holding company’s total ownership of the oil and gas player 224.13 million shares.
The recent investment signals the willingness of the holding company to explore new investment opportunities and pour money into a company that is highly exposed to volatility in oil and gas prices. This reflects that Warren Buffett is probably bullish on oil prices since the fate of the energy player is mostly dependent on crude prices.
Oil Price to Remain Favorable
The U.S. Energy Information Administration (“EIA”) has also expressed bullishness on oil prices in its short-term energy outlook. Currently, West Texas Intermediate (“WTI”) oil and Brent crude are trading at more than $75 per barrel and $80 per barrel marks, respectively. The pricing environment will remain favorable, as echoed in EIA’s healthy projection of $74.43 per barrel and $79.34 per barrel for WTI and Brent oil for this year.
The expectation is handsome, despite lower year-over-year prices since the projected commodity prices will still be promising for exploration and production activities. EIA, in its short-term energy outlook, added that anticipation of declining oil inventories, across the globe, over the next five quarters will create upward pressure on oil prices.
3 Stocks to Buy
Given the backdrop, it can be concluded that investors should allocate money to stocks of the companies whose operations are directly correlated with oil prices and are capable of capitalizing on the favorable business landscape. Employing our proprietary stock screener, we have zeroed in on three stocks sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International is well placed on improving oil prices since it is a leading provider of engineered services and products and robotic solutions to the energy companies working offshore. Higher oil price is supporting increased upstream activities, which, in turn, will improve demand for Oceaneering’s drilling and completions support services.
Ecopetrol is a well-known integrated energy player in the American continent, with Permian – the most prolific basin in the United States – being a prominent growth driver. Ecopetrol is responsible for as high as 60% of hydrocarbon production in Colombia and thus is well-positioned to derive more cashflows from improving oil prices.
Battalion Oil is also a highly prospective stock to gain on healthy oil prices since it is engaged in exploring, producing and developing liquid-rich resources in the prolific Delaware Basin. Battalion Oil is a pure-play Delaware operator with a deep inventory of high-return locations, securing a solid production outlook.
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Warren Buffett's Bet on OXY Signals Rosy Energy Outlook: 3 Picks
Late last month, legendary investor Warren Buffett’s company Berkshire Hathaway Inc. (BRK.B - Free Report) further boosted its stake in Occidental Petroleum Corporation (OXY - Free Report) amid its falling share prices. This is thereby widening Berkshire Hathaway’s lead as the largest shareholder in Occidental.
The bet on the oil and gas major signals a bullish outlook for the energy sector as a whole. Thus, energy players like Oceaneering International, Inc. (OII - Free Report) , Ecopetrol S.A. (EC - Free Report) and Battalion Oil Corporation (BATL - Free Report) are well-poised to gain.
Berkshire Hathaway Lifts OXY Stake
Berkshire Hathaway recently announced in its filing with the Securities and Exchange Commission that it has increased its stake in Occidental to more than 25%. Berkshire Hathaway bought 2.14 million more Occidental shares for $122.1 million. This makes the Omaha, NE-headquartered holding company’s total ownership of the oil and gas player 224.13 million shares.
The recent investment signals the willingness of the holding company to explore new investment opportunities and pour money into a company that is highly exposed to volatility in oil and gas prices. This reflects that Warren Buffett is probably bullish on oil prices since the fate of the energy player is mostly dependent on crude prices.
Oil Price to Remain Favorable
The U.S. Energy Information Administration (“EIA”) has also expressed bullishness on oil prices in its short-term energy outlook. Currently, West Texas Intermediate (“WTI”) oil and Brent crude are trading at more than $75 per barrel and $80 per barrel marks, respectively. The pricing environment will remain favorable, as echoed in EIA’s healthy projection of $74.43 per barrel and $79.34 per barrel for WTI and Brent oil for this year.
The expectation is handsome, despite lower year-over-year prices since the projected commodity prices will still be promising for exploration and production activities. EIA, in its short-term energy outlook, added that anticipation of declining oil inventories, across the globe, over the next five quarters will create upward pressure on oil prices.
3 Stocks to Buy
Given the backdrop, it can be concluded that investors should allocate money to stocks of the companies whose operations are directly correlated with oil prices and are capable of capitalizing on the favorable business landscape. Employing our proprietary stock screener, we have zeroed in on three stocks sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Oceaneering International is well placed on improving oil prices since it is a leading provider of engineered services and products and robotic solutions to the energy companies working offshore. Higher oil price is supporting increased upstream activities, which, in turn, will improve demand for Oceaneering’s drilling and completions support services.
Ecopetrol is a well-known integrated energy player in the American continent, with Permian – the most prolific basin in the United States – being a prominent growth driver. Ecopetrol is responsible for as high as 60% of hydrocarbon production in Colombia and thus is well-positioned to derive more cashflows from improving oil prices.
Battalion Oil is also a highly prospective stock to gain on healthy oil prices since it is engaged in exploring, producing and developing liquid-rich resources in the prolific Delaware Basin. Battalion Oil is a pure-play Delaware operator with a deep inventory of high-return locations, securing a solid production outlook.