As the energy sector is getting rocked by budget cuts, employee layoffs, and declining stock prices, wider equity markets are continuing their see-saw motion in response to a possible Chinese economic collapse.
If the actions of these two legendary billionaire investors are any indication, the oil price forecast may be poised for a big rebound. The principles of investment stress the importance of accepting high risk for the chance of a high reward, and these two contrarians are certainly banking on an oil price rally.
Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-A, BRK-B) reported a purchase equal to more than a 10% stake in Phillips 66 (NYSE:PSX), based out of Houston. (Source: CNBC, last accessed September 4, 2015.) The stake is worth approximately $4.5 billion, spread over 58 million shares.
Carl Icahn is also on course to stimulate interest in struggling companies, even if they are operating in a declining commodity market.
The billionaire seems to be following a similar strategy to Buffett’s; investing $900 million and raising his stake in Freeport-McMoRan Inc. (NYSE:FCX) to 8.5%. (Source: BizJournals, last accessed September 4, 2015.) But that’s not all. The investor has also landed himself two seats on the board of directors for Cheniere Energy, Inc. (NYSE MKT:LNG). (Source: Forbes, last accessed September 4, 2015.)
Icahn is also in possession of a controlling stake in CVR Energy (NYSE:CVI), along with large holdings in Transocean, and Chesapeake Energy (NYSE:CHK) (Source: The Street, last accessed September 4, 2015.)
The overall effect of these high-profile investments by these two giants has been stabilizing for the oil market in general, as other investors take it as a signal that better times may be ahead for the besieged energy sector.