The market is down, but occidental petroleum surged 100%? Did Warren Buffett's investment strategy change dramatically in 2022 due to occidental petroleum? (Follow, comment and receive 66 points)

The release of the CPI in April caused a drop in the US stock market.

8.3%, higher than expected.$Nasdaq Composite Index (.IXIC.US)$ It dropped by 3%,$S&P 500 Index (.SPX.US)$ It also dropped by 1.65%,$Apple (AAPL.US)$ Even crashed by 5%, losing its top global position,But in the "sea of green", there was still a bit of positive, last night$Occidental Petroleum (OXY.US)$ Still rose against the market.

Do you know that, as of the close of May 10, 2022,Occidental Petroleum'syear-to-date cumulative increase has reached exactly 100%.。

While the Dow Jones Index fell by a cumulative 11.26% during the same period.

In other words, Warren Buffett made a big profit from petroleum once again. Just two days ago on May 3, Berkshire Hathaway led by Buffett made another big investment in Occidental Petroleum, spending $336 million, increasing the shareholding percentage to 15.2%. This is his fourth shareholding increase this year.

Why did Warren Buffett increase his shareholding in petroleum stocks four times in 2022?

Why was petroleum able to go against the norm and rise crazily in 2022?

Why did Warren Buffett buy petroleum?

At this year's Berkshire Hathaway annual shareholder meeting in 2022, when asked by investors about his views on the petroleum industry,

Munger said: In the future two hundred years, petroleum will be a very valuable resource.

Buffett, on the other hand, was more direct in saying.: Now the U.S. federal government has over a billion barrels of storage. Now everyone thinks that it's a good thing for the country to have so much oil in storage,but if you think about it carefully, it's not enough. These reserves will be gone in three to five years, and you never know what it will be like in three to five years.

In a Reuters news report, Buffett also stated the reasons for buying shares in Occidental PetroleumBuffett has confidence in the CEO of Occidental Petroleum, "because the company has a good annual report, so I bought it."

How good is Occidental Petroleum's financial report for Q2?

The financial report shows that Occidental Petroleum's total revenue in Q1 increased by 55.74% year-on-year to $8.533 billion, with a net profit of $4.7 billion, reaching a record high. The earnings per share were $2.12, exceeding the analysts' average expectation of $2.03. At the same time, Occidental Petroleum also has ample cash flow,Free cash flow reached $3.3 billion, also hitting a new high.

The company's Free Cash Flow for the Firm (FCFF) is the balance of cash flow from operations after deducting capital expenditures and taxes necessary to maintain existing operations.The company's free cash flow is used to measure the actual cash available to return to shareholders.This portion of cash flow is the maximum amount of cash available for distribution to the company's providers of capital (including creditors and shareholders) without compromising the company's ongoing development.

In terms of providing shareholder returns,Occidental Petroleum raised its first-quarter quarterly dividend for 2022 to $0.13 per share, reflecting Occidental Petroleum's ample free cash flow.

Historically,Occidental Petroleum has a stable dividend policy that can weather market fluctuations.From the perspective of dividend payments, occidental petroleum has maintained stable dividend payments during the 2007 financial crisis and the 2015 shale revolution-induced oil price plunge, except for the special period of negative oil prices in 2020.

Now, as inflation remains high in the United States and other countries, the Federal Reserve starts raising interest rates, causing previously soaring growth stocks to stagnate or even experience significant declines, squeezing bubbles. Risk aversion in the market is on the rise, at this time,Being able to stably receive dividends, while high-dividend stocks that have not had much growth before become one of the best defensive sectors. Consequently, they have started to attract market attention and funding.

This is also one of the important reasons why Buffett heavily invested in occidental petroleum in 2022.

Historical data shows that,During the interest rate hike process, crude oil prices tend to rise, and oil prices only fall around the end of the interest rate hike cycle.During the early to mid-stages of the fourth interest rate hike cycle in U.S. history (2015.12-2018.12), oil prices rose by 19%. During the third interest rate hike cycle in history (2004.6-2006.6), oil prices rose by 146%.

Can we still invest in petroleum stocks at this time?

Before answering this question, let's carefully review why petroleum stocks have become so attractive.

First, it is worth noting thatas the United States enters a tightening cycle, international oil prices gradually show a high-volatility trend, remaining near phase highs.

Since the rebound from the lows in early December 2021, WTI crude oil futures prices have soared by up to 103.59% in range. As of now, the cumulative increase for this year is 37%.

Against the backdrop of escalated sanctions by Europe and the United States against Russia, the stalemate in the Russia-Ukraine situation, slow increase in crude oil supply, continuous recovery in demand, and high inflation,there is a certain level of uncertainty in the future direction of oil prices.。

However, the news of the United States planning to supplement strategic petroleum reserves in May still provides strong support to oil prices.

According to CNN, the US Department of Energy revealed that the United States will initiate a long-term plan to supplement its strategic petroleum reserves. The Biden administration plans to purchase 60 million barrels of crude oil this fall, equivalent to one-third of the planned release.

Previously, the US government also announced an unprecedented large-scale oil reserve release plan: over the next 6 months, the US will release 1 million barrels of strategic petroleum reserves each day, totaling 180 million barrels of oil, marking the largest release since the establishment of the US oil reserve plan in 1974.

The Department of Energy stated that the US Department of Energy plans to change existing rules to allow for the appearance of "competitive fixed prices" in bids, rather than linking the purchase price to market prices.

As the US dollar strengthens and gradually squeezes out the financial premium of crude oil, this monetary policy is expected to have a more fundamental impact on oil prices. If the economy continues to grow during the interest rate hike cycle, the negative impact of this rate hike on oil prices may be limited.

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