We came across a bullish thesis on Occidental Petroleum Corporation (OXY) on WallStreetBets subreddit page by TheRealMarket. In this article, we will summarize the bulls’ thesis on OXY. OXY Technologies, Inc. share was trading at $51.54 as of Sept 30th. OXY’s trailing and forward P/E were 13.35 and 11.15 respectively according to Yahoo Finance.
A row of massive oil rigs in a desert landscape, against a setting sun.
Occidental Petroleum Corporation (OXY) is currently trading near its 52-week low because of the broader weakness in oil prices. Historically, OXY’s stock price has been closely correlated with fluctuations in crude oil prices. Whenever oil prices have approached $65 per barrel on the WTI Crude index, it has often signaled a significant bottom for both oil and OXY’s stock. Given the cyclical nature of the oil market, along with Occidental’s solid fundamentals, the company appears undervalued, offering a compelling entry point for long-term investors.
Over the past two years, oil prices rebounded each time they tested this $65 level, and OXY’s stock price followed suit. This behavior of the stock suggests that downside risk for Occidental may be limited at current levels. Global demand for oil is still strong and due to the potential supply constraints from geopolitical tensions or OPEC production cuts may further stabilize or even drive prices higher in the medium term. As oil prices recover the company is expected to benefit from increased revenues and profitability, providing a favorable tailwind for its stock.
From a valuation perspective, OXY’s P/E ratio is below its historical average and lower than many of its peers in the energy sector. The company’s vast oil and gas reserves, along with its investments in sustainable energy technologies, position it well to weather market fluctuations. Furthermore, Occidental has significantly improved its financial health, reducing debt and strengthening its balance sheet. This reduces its vulnerability to oil price volatility.
Adding to its credibility, Warren Buffett’s Berkshire Hathaway has steadily increased its stake in the company over the past two years, signaling strong institutional confidence in OXY’s long-term outlook.
Thus looking at Occidental Petroleum’s current valuation, combined with its operational resilience and potential for oil price recovery, offers substantial upside. For investors seeking value in the energy sector, OXY’s strong fundamentals and strategic positioning in both oil production and sustainable energy technologies make it an attractive buy at its current price level.
Occidental Petroleum Corporation is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 62 hedge fund portfolios held OXY at the end of the second quarter which was 61 in the previous quarter. While we acknowledge the risk and potential of OXY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than OXY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.