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A Look At Warren Buffett’s Favorite Oil Stock

It is no secret that Warren Buffet, or more accurately his holding company, Berkshire Hathaway (BRKA: BRKB), has been amassing a significant stake in Occidental Petroleum (OXY). Their stake is big enough to be subject to disclosure requirements, so it is public knowledge that they now own around a quarter of the company. Buffet has said, though, that they are not going to take outright control of OXY. That suggests that a major impetus for the stock's rise is about to go away, but that doesn't mean that those who hold it should sell, nor that it isn't worth buying at current levels.

Buffets' reason for not pursuing a controlling stake speaks volumes. He believes, he says, in the company's current management, which is, in part, why he has been buying. He sees no need to take over completely and make changes. As much as it can be when you own 25% of a company's stock, this is a passive investment. That is a part of the overall strategy that Buffet has been using for years, a strategy that has made him a billionaire.

He has said many times that there is no magic or secret sauce behind his success, nor does he believe he is just smarter than everyone else. What he does, as he frequently tells us, is buy stock in well run companies with a time horizon measured in decades, then rides out market fluctuations, occasionally trimming positions at times of strength, then buying back on significant drops. That isn't a revolutionary idea. It is, logically, what we should all do,…

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