Feb 23, 2021 (Baystreet.ca via COMTEX) -- For decades, Berkshire Hathaway /zigman2/quotes/200060694/composite BRK.B +0.89% chairman and CEO Warren Buffett maintained a pretty conservative approach to investing, favoring retail and banking stocks while avoiding sectors such as tech and energy. However, he finally pulled the trigger on PetroChina Co. /zigman2/quotes/205108732/composite PTR +3.76% in 2002 and Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.20% in 2011. The Oracle's foray into energy and tech initially paid off after he realized a tidy $3.5B profit on PetroChina, while his $90 billion Apple stake now represents a ridiculous 20% of Berkshire Hathaway's market value.
However, Buffett has lately been doubling down on his energy investments while trimming his tech and banking holdings.
After a period of relative calm last year, Warren finally announced some long-awaited investments, including a $4.1 billion investment in Chevron Inc. /zigman2/quotes/205871374/composite CVX +2.69% , good for a nearly 2.5% stake in the giant oil company. Chevron is now the conglomerate's 10th biggest equity holding.
Meanwhile, Buffett trimmed its holding in Apple to 887.1M shares from 944.3M and Wells Fargo /zigman2/quotes/203790192/composite WFC +0.44% to 52.4M from 127.4M shares, according to Berkshire Hathaway's latest 13F filing.
Berkshire Hathaway has always operated on Buffett's famous ethos of buying when the market is fearful and selling when it gets greedy. It, therefore, came as a huge surprise that the giant conglomerate remained muted when the market crashed in April despite sitting in a massive $137 billion cash hoard. But it appears that the energy sector has become too much of a bargain for Buffett to continue ignoring.
It's also a clear sign that Buffett sees long-term value in a sector that's been taking plenty of flak lately.
Buffett is not the only billionaire who's doubling down on energy. Occidental Petroleum /zigman2/quotes/207018272/composite OXY +4.60% , Energy Transfer LP /zigman2/quotes/210213433/composite ET +1.59% ,PG&E Corporation /zigman2/quotes/202583141/composite PCG -3.00% worth more than $800 million combined are now in David Tepper's top 12 holdings.
Here's a peek into Buffett's latest energy buys.
Chevron stock plunged to its lowest level since 2006 after the pandemic crashed the oil and gas sector, and has failed to fully recover despite a bright start to the year.
The integrated energy company posted a net loss of $5.5 billion for FY 2020, and the stock is currently trading 15% lower than a year ago.
With so much uncertainty surrounding the oil and gas sector and fears that it might be years before oil prices can fully recover to pre-pandemic levels, the ability of a company to withstand a prolonged bust cycle is an important consideration.
And...Chevron wins the stress test by a country mile.
Wood Mackenzie, a global energy, renewables, and mining research and consultancy group, has reported that Chevron Corp and Royal Dutch Shell /zigman2/quotes/205095589/composite RDS.A +2.92% are the most resilient, thanks to their robust deepwater projects and LNG as well as less exposure to high-cost assets.
Investing in Big Oil companies like Chevron comes with some risks, though.
Wall Street has been rapidly raising its climate standards, with BlackRock Inc. /zigman2/quotes/207946232/composite BLK +1.74% , the world's biggest asset manager, recently disclosing plans to pressure companies to do a lot more to lower their carbon emissions by leveraging the massive weight of his firm mammoth asset base.
Chevron has not been moving as quickly as some of its European rivals and continues to expand its oil footprint, including its $5 billion purchase of Noble Energy last year. CVX has failed to make major investments in solar and wind beyond supporting its own power needs, meaning buying Chevron is a bet that oil demand will fully recover from Covid-19 despite growing public pressure.
That's a possibility, but no longer seen as a given.