Buffett Chips Away at Cash Pile With Bigger Occidental Bet

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(Bloomberg) — Warren Buffett’s high-class problem of too much cash and too few opportunities may be easing.

His Berkshire Hathaway Inc. disclosed Friday that it had snapped up almost 30 million additional shares of Occidental Petroleum Corp., worth roughly $1.6 billion midday Monday amid volatility in stocks due to a potential ban on Russian oil that sent the price of crude surging.

That purchase helped put some of the conglomerate’s near-record $146.7 billion pile of cash to work. Buffett and his team also have two other potential ways to deploy funds lurking on the horizon, including buying out the now-deceased Walter Scott’s position in Berkshire’s energy business, and snapping up more of Pilot Travel Centers LLC, increasing its ownership to a majority stake, according to Edward Jones analyst Jim Shanahan.

“Berkshire’s cash balance has been rising steadily in recent years, and the only significant use of cash has been for share repurchases,” Shanahan said in a note to clients Monday. “We are becoming more optimistic about cash deployment and believe that there are at least two sizable investments possible in the next year or so.”

Berkshire, based in Omaha, Nebraska, is uniquely familiar with Occidental, having agreed in 2019 to buy a preferred stake and warrants in the oil producer to help its deal with Anadarko Petroleum Corp. Buffett told CNBC that he bought the new Occidental shares after its latest earnings call. His purchase comes as another billionaire investor, Carl Icahn, sold his remaining stake in the Houston-based company.

Buffett told investors in his annual letter, released in late February, that “little” in the public stock market excites him and business partner Charlie Munger these days amid high valuations. Still, some previous deals, including his acquisition of an initial 38.6% stake in Pilot Travel Centers, have set him up to spend even more money in the future. With Pilot, he’d agreed to purchase an additional 41.4% interest in 2023, an investment likely to require $4 billion, Shanahan said.

“In the annual letter,” Shanahan said, “Warren Buffett expressed a clear preference for investments versus share repurchases, which we expect to slow in 2022.”

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