Warren Buffett is making a contrarian play on black gold. The renowned stock picker's investment vehicle, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), revealed Tuesday that it recently opened a position in struggling energy giant Chevron (NYSE: CVX), with a holding of nearly 48.5 million shares.
This was disclosed in Berkshire's latest 13F, the quarterly report it is required to file detailing its holdings in publicly traded companies. This 13F is a snapshot of the company's positions as of Dec. 31.
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According to data compiled by Yahoo! Finance, Chevron currently has 1.93 billion shares outstanding, so Berkshire's holding comprises 2.5% of that total. At the time of the filing, Berkshire's holding was worth roughly $4.1 billion.
Quarterly reports designated as 13Fs are simply lists of stock positions; as such, they do not provide explanations for why a company buys a stock. Additionally, Berkshire as a company doesn't habitually offer justifications for its moves after they are revealed.
Yet the Chevron buy is entirely in character for Buffett who throughout his career has pounced on individual stocks and sectors that have fallen out of favor with investors. At the moment, the energy industry as a whole continues to suffer from weakened demand arising from the coronavirus pandemic.
As a result, the company posted a 30%-plus year-over-year fall on the top line in its most recently reported quarter and flipped to a non-GAAP (adjusted) net loss of $11 million. Chevron also hit the brakes hard on capital expenditures, which it cut by 35% in 2020 compared to the previous year.
Revelations of a fresh Berkshire buy often induce the "Buffett Effect" on a stock's price, and that dynamic was at work on Tuesday. Chevron's shares closed the day over 2% higher against the flat performance of the S&P 500 index.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short January 2023 $200 puts on Berkshire Hathaway (B shares), short March 2021 $225 calls on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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