One of the world’s leading investors may be giving up on an oil giant. Apparently, Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) sold 20% of its Chevron (NYSE:CVX) holdings during the first quarter. According to a recent earnings report, Berkshire sold about 35 million shares of CVX stock for a roughly $6 billion profit.
This move isn’t all that surprising. CVX stock has been struggling over the past year, with shares currently up by under 1% for the past 12 months. Now, the Oracle of Omaha seems to be shifting his focus to other companies.
Does this mean other investors should follow Buffett’s example and steer clear of Chevron? Let’s take a closer look.
What’s Happening With CVX Stock?
News of Buffett selling didn’t immediately push CVX stock down today. In fact, shares actually popped higher as markets opened, then reversed course. As of this writing, shares are now up just 0.25%. That said, with this kind of volatility, it’s impossible to predict where CVX stock will go from here. Today has been mixed for the oil and gas sector on the whole, with Exxon Mobil (NYSE:XOM) in the green while Shell (NYSE:SHEL) stock is in the red.
Berkshire’s Chevron sale isn’t the only development regarding Buffett and Big Oil. Occidental Petroleum (NYSE:OXY) stock is down about 2% after the famed investor indicated he has no intention of acquiring the company. However, Buffett also noted that he is happy with the firm’s current OXY stock position. This suggests that Berkshire isn’t giving up on the oil sector completely.
Still, the company certainly seems to have soured on Chevron. Business Insider reports:
“Buffett and his team slashed their Chevron stake by roughly 20% or 35 million shares, to around 163 million shares. That figure is based on the stated decline in the position’s value, and the fossil-fuel titan’s average share price of $168 in the quarter […] Multiplying 35 million shares by $168 gives a figure close to $6 billion, representing about 45% of Berkshire’s total stock sales in the period.”
Of course, Berkshire hasn’t offloaded its entire CVX stock position. But if the company sold off that much, it clearly isn’t overly optimistic about Chevron’s immediate future. InvestorPlace contributor Vandita Jadeja has pointed to Chevron’s strong balance sheet and cash flow before, but Buffett seems to see more potential elsewhere.
While oil prices have been rising recently, recession fears among U.S. investors appear to be falling. This is creating a mixed outlook for oil producers and, if it continues, more investors may be inclined to zero-in on other sectors. In turn, that could push oil stocks down even further.
Why It Matters
Chevron may have a strong balance sheet, but it hasn’t reported any company-specific catalysts recently. That may be part of what has compelled Berkshire Hathaway to reduce its CVX position. It’s also hard to ignore the fact that betting on Big Oil is becoming increasingly difficult as clean energy booms.
Buffett isn’t giving up on Chevron just yet. However, unless Berkshire buys more shares soon, it’s relatively safe to conclude that Buffett and his team are transitioning away from CVX stock.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
