Occidental Petroleum

Occidental Petroleum is a Berkshire Hathaway energy holding that began unusually—not as a common-stock purchase but as $10 billion of preferred financing in 2019 to help Occidental acquire Anadarko.

The Investment

Berkshire's 2019 preferred carried a 8% dividend and came with warrants to buy a large block of common stock at a fixed strike. As Occidental's fortunes and energy prices recovered, Berkshire also built a substantial common-stock position, eventually holding roughly a quarter of the company (subject to regulatory limits).

Why It Fits the Framework

• Structured bargain: the preferred plus warrants delivered a fixed return plus upside—a margin of safety by contract.
• Energy cash flow: Occidental's assets generate the kind of free cash flow that funds dividends and buybacks under sound capital allocation.
• Patient, flexible entry: Berkshire took a creditor's seat first, then converted to ownership as the picture clarified.

A Different Shape of Bet

Occidental shows Buffett using preferred stock and warrants—tools of the pragmatic investor—to earn a contractual return while keeping optionality on the equity, a structure reminiscent of the discipline behind insurance float.