The global pandemic changed investor behaviors across the board, as market dynamics shifted toward some sectors and away from others.
As usual, Warren Buffett, chairman at Berkshire Hathaway, was – and still is – ahead of the curve as the so-called Sage of Omaha made multibillion bets on oil and gas at a time when politicians and social advocates were hammering fossil fuels.
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Berkshire Hathaway Energy, a subsidiary of Berkshire already owns 5,400 miles of natural gasoline pipelines and 756 billion cubic feet of natural gas assets. Berkshire also owns 7% of Chevron (worth approximately $21 billion) and it owns 25.1% (worth $13.4 billion) of Occidental Petroleum.
Warren Buffett Gets the Last Laugh
Also just like usual, Buffett had the last laugh, as his oil and gas bet earned billions of dollars in returns in the past two years. That was especially the case as demand for cheap energy exploded during the pandemic and as oil and gas company share prices climbed as the world emerged from the pandemic and lockdowns and hit the open road again.
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Now, he’s back for more, steering billions more into the fossil fuel sector this summer, according to Bloomberg.
Buffett is reportedly buying $33 billion worth of shares in a Maryland-based liquified natural gas export terminal and is boosting Berkshire’s Occidental holdings by 15%. Buffett is also reportedly backing a new Texas that would see the Lone Star State spending $10 billion on natural gas power plants to support its lackluster energy grid.
Wall Street watchers are quick to acknowledge that Buffett is outclassing investors who’ve turned their backs on oil and gas, and who’ve pivoted to environment, social and government-themed energy (ESG) stocks.
“People are missing the economics that Buffett and Munger are looking at,” said Cole Smead, chief executive officer of Smead Capital Management, in comments to Bloomberg. “The returns on capital in coal, oil, and gas are off the charts compared with other sectors.”
