The negative oil price forecast might have you running for the hills, but billionaire investors Warren Buffett and Carl Icahn are sticking to their stock picks in the oil sector.
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.