Berkshire Hathaway Bought Massive VeriSign's and Occidental Petroleum's Shares Despite the Corporate Underperformance

 

 

According to the latest SEC disclosure, Berkshire spent an additional $28.55 million to add 143,424 shares of VeriSign over three trading days within the past week. Currently, Berkshire owns about 13.7% of VeriSign, with a nearly $2.7 billion market capitalization.

 

According to Berkshire Hathaway's Form 4 filing with the SEC last Thursday (Dec. 26), the company spent $73.95 million to increase its stake by 377,736 shares.

 

VeriSign is a global domain name registry services provider, with a muted stock price. According to Wind Data, VeriSign is down 0.98% year-to-date. However, Berkshire's investment management team said that VeriSign's stock had value-added space because of its irreplaceable role in the global internet architecture.

 

Similarly, Berkshire Hathaway purchased underachieved Occidental Petroleum's stock for $409 million, raising Berkshire's stake in Occidental Petroleum to about 28.2%. However, underperformances are always prone to losses. According to Bloomberg, Berkshire’s position in Occidental Petroleum has created an unrealized loss of nearly $2.2 billion.

 

Occidental Petroleum has a yearly decline of over 17%, over-indebted risks, and a widely perceived bleak outlook. Nevertheless, analysts believe Buffett sees Occidental Petroleum's long-run potential.

Leo Mariani, an analyst at Roth Capital, said Buffett's purchase indicated that Occidental Petroleum was attractively priced because shares had been oversold. He also mentioned that despite sluggish oil prices, some of Occidental's projects, especially its oil and gas reserves in the Americas, were promising.

 

Occidental Petroleum generated sizable returns for Berkshire. In 2019, Berkshire purchased $10 billion worth of Occidental's preferred stock, giving Berkshire $800 million in annual cash flow.

 

Lastly, Berkshire bought about 5 million shares of Sirius XM, a satellite radio company, for about $113 million. Currently, Berkshire's stock position allocation is as follows: about 264.3 million shares of Occidental Petroleum, or 28.2% of the company's shares; about 117.5 million S of Sirius XM shares, or 34.6% of the company's shares; and about 13.2 million shares of VeriSign, or 13.7% of the company's shares.

 

It is important to note that three invested companies declined when the S&P 500 rose more than 25% in 2024. Experts point out that Buffett has invested prudently due to high market volatility and global economic uncertainty. Whether Buffett's investment strategy can remain successful requires time to verify.