Warren Buffett’s investment firm Berkshire Hathaway is doubling down on fossil fuels, continuing to make multi-billion dollar investments in the sector.
Rather than cashing in the profits it made from its early pandemic energy investments, Berkshire Hathaway is still loading up its oil and gas portfolio despite souring sentiment towards the sector amid poor environmental, social, and governance performance and future demand concerns.
This month, Berkshire Hathaway spent $3.3 billion to purchase a 50% stake in the Cove Point, Maryland liquefied natural gas facility from Dominion Energy.
Also this year, it upped its stake in Occidental Petroleum to more than 25% and increased its investment in five Japanese commodity traders –Sumitomo, Mitsui & Co, Mitsubishi, Marubeni and Itochu – now holding an average stake of about 8.5% in each company.
It also remains the third-largest shareholder in Chevron, despite cutting its stake by about 21% during the first quarter of 2023, selling about $13 billion of stock during the period.
It appears Buffett is leveraging 2023’s dip in commodity prices to increase its stake in oil and gas favorites.
According to data compiled by Bloomberg, the energy sector trades at the lowest price-to-earnings ratio in the S&P 500 stock index, however, it generates the highest cash flow per share.
Notably, a number of Berkshire Hathaway’s oil and gas investments are in companies that have assets that will prove vital in the energy transition, no matter how that plays out, implying that Buffett’s fossil fuel bet may be more nuanced than it initially appears.
Contact the author at emily.jarvie@proactiveinvestors.com
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