Key Points

• Warren Buffett tends to buy well-run companies and hold them for the long term.

• Even well-run companies fall out of favor on Wall Street.

• With a 4.7% yield, this high-yield stock is built to survive whatever comes its way.

Warren Buffett has built an incredible track record running Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B). And he did it using simple-to-understand logic: Buy well-run companies when they look attractively priced and then hold for the long term (so you can benefit from the growth of the business over time). But even well-run companies fall out of favor, and that's why this Buffett stock, with a lofty 4.7% dividend yield, is worth buying in July.

Two oil picks with different industry approaches

Energy stocks are currently suffering through a period of volatility thanks to geopolitical tensions. That's not unusual at all. The energy market is known for being volatile, and so are most stocks in the energy sector. Buffett has two energy investments, Occidental Petroleum (NYSE: OXY) and Chevron (NYSE: CVX). They have materially different industry positions.

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Image source: Getty Images.

Oxy, as it is more commonly known, is focused on growing its business as quickly as practicable so it can better compete with established industry giants like, well, Chevron. Chevron, an industry giant, is focused on slow growth and -- here's the key for investors -- surviving through the inherent ups and downs of the energy sector. The second bit is why Chevron is so attractive as July gets underway.

There are three parts to Chevron's story. The one that will likely be most interesting to investors is its reliable dividend. The integrated energy giant has increased its dividend year in and year out for 38 consecutive years. That's an incredible streak given the price swings that have occurred in oil over that span. The company is, clearly, focused on rewarding investors for sticking around.

The interesting part is that this reliable dividend stock's dividend yield gets attractive during the tough times. Right now is a tough time thanks to both industry issues and some company-specific problems. History suggests Chevron will muddle through and continue to pay its dividend. In the meantime, investors can collect a hefty 4.7% dividend yield.

What backs Chevron's lofty yield?

A big yield that gets reliably paid is nice, but it doesn't fully explain why Buffett has Chevron in Berkshire Hathaway's portfolio. Which is where the next two parts of the Chevron story come in.

First, Chevron is an integrated energy giant. That means that it has exposure to the entire energy value chain, from producing oil and natural gas, to transporting the commodities, to processing them into other products. Each segment works a little differently through the energy cycle. Having exposure to all of them helps to smooth out performance over time. On top of that diversification, Chevron also has a global portfolio. So it can shift its investments to where they will have the best opportunity for success.

CVX Debt to Equity Ratio data by YCharts

That's a solid start, but there's another important factor. Chevron also has one of the strongest balance sheets in the energy patch, with a debt-to-equity ratio of just 0.2 times. That gives management the leeway to add debt during industry downturns so it can continue to support the business and dividend through hard times. When commodity prices recover, as they always have historically, it pays down its debt in preparation for the next downturn.

Buy Chevron when others are selling the stock

Chevron's stock is down around 20% from its 2022 highs, when oil prices were much higher. Long-term dividend investors shouldn't get too hung up on the downturn or the reasons why. Chevron is built to survive whatever comes its way. It probably makes more sense to just follow Buffett's "simple" approach and buy this well-run company while it is attractively priced and then hold it for the long term.

Should you invest $1,000 in Chevron right now?

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

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Reuben Gregg Brewer has positions in TotalEnergies. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends BP and Occidental Petroleum. The Motley Fool has a disclosure policy.

While it appears as though a temporary ceasefire may be on the horizon, the war between Israel and Iran is likely to linger into the future, with the U.S. now involved to a degree after last weekend's bombings of Iran's nuclear facilities.

If things were to re-escalate, the Iranian regime could take a worst-case, most damaging counter-measure by blockading the Strait of Hormuz, the narrow waterway between Iran and Oman through which 21% of the world's oil consumption flows.

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If that were to happen, oil prices would spike in the short term and stocks would probably move lower. However, the following U.S.-focused oil and gas giants would each benefit, with one being a Warren Buffett favorite.

Image source: Getty Images.

ConocoPhillips

ConocoPhillips (NYSE: COP) is one of the largest U.S.-based oil and gas giants, which also has a very high concentration of its exploration and production in the United States. Although ConocoPhillips is diversified geographically, about 75% of its operating earnings come from the contiguous U.S., Canada, and Alaska. The next largest segment is in the Pacific, across China, Malaysia, and Australia.

A remaining 12.5% or so of its earnings comes from Europe, Middle East, and North Africa. While ConocoPhillips does have some production in Qatar, which would be affected by the closing of the Strait of Hormuz, that production is just a portion of this segment, and thus a small fraction of Conoco's overall production.

Conoco currently trades fairly cheaply, at just 11.6 times earnings with a 3.4% dividend yield, reflecting a low-growth outlook. However, if oil prices were to spike, management says that for every $1 increase in the price of Brent crude oil, Conoco would increase its operating cash flow by $65 million to $75 million. For every $1 increase in West Texas Intermediate, Conoco would see an additional $140 million to $150 million.

Conoco gives investors the strength of a very large-cap oil company with an excellent balance sheet and relatively low debt for its size, at less than equal to EBITDA. So it's a risk-off play for those who nevertheless would like concentrated exposure outside the Middle East.

EOG Resources

EOG Resources (NYSE: EOG) is present in most of the major shale plays in the United States, along with exploration properties in Trinidad and Tobago. As a 100% U.S.-based producer, EOG's cargos obviously don't flow anywhere near the Strait of Hormuz.

EOG has also been an excellent operator, having steadily ramped its cash flow, and along with it, total shareholder returns. Between 2021 and 2024, EOG has more than doubled its dividend, which now yields 3.3%, while also adding share repurchases. In that same time span, EOG has increased its total shareholder payouts, dividends and repurchases included, from 48% of free cash flow to 98%.

EOG has also been able to garner higher-than-average oil and gas price realizations than its peers, thanks to its well positioning near low-cost pipelines and storage operators, which enables EOG to realize more of its oil and gas sales than others. That means if the price of oil spikes on a Middle East geopolitical conflict, EOG Resources could disproportionately outperform.

EOG has been able to return so much cash to shareholders because of its excellent balance sheet, which is actually unlevered, with more cash than debt. As such, it's another low-risk way to play U.S. shale.

Occidental Petroleum

A third great option for U.S.-focused investors is Warren Buffett holding Occidental Petroleum (NYSE: OXY). Although Occidental does have some of its production in the Middle East, specifically Oman, which would be affected by any closure of the Strait of Hormuz, about 84% of its production comes from the U.S., with over half of its total production concentrated in the oil-gushing, low-cost Permian Basin in West Texas, where Occidental has 2.9 million acres of land.

Occidental's onshore inventory is also very deep, with 13 years of production at the today's rates at breakeven prices below $60 per barrel, with 10 years of inventory with breakeven costs under $50, and a good portion of those wells having breakeven costs below $40.

Meanwhile, Occidental has a history of lowering costs over time, opening up more of its inventory. On the recent earnings release, Occidental management noted that it had reduced well costs by 12% across its U.S. fracking portfolio since 2023.

As the company with some of the deepest inventory in the Permian Basin, Occidental is very well positioned for the long term, which is probably why Buffett is such a fan. And of course, if non-U.S. supply was cut off for any reason, because of the closing of the Strait of Hormuz or some other geopolitical event, Occidental would be a prime beneficiary.

That being said, Occidental also has a higher debt load than the other companies mentioned, especially after its $12 billion acquisition of CrownRock last year. So that's something for investors to monitor. However, should the price of oil spike, Occidental may have more upside as a leveraged play on U.S. oil and gas.

Should you invest $1,000 in Occidental Petroleum right now?

Before you buy stock in Occidental Petroleum, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Occidental Petroleum wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $676,023!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,692!*

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*Stock Advisor returns as of June 23, 2025

Billy Duberstein and/or his clients have positions in ConocoPhillips. The Motley Fool has positions in and recommends EOG Resources. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

While Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) sometimes will move in and out of stocks on a short-term basis, the company -- led by famed CEO Warren Buffett -- is largely considered a long-term investor.

This can sometimes make it difficult to immediately understand why Buffett and his team are buying a stock or a group of stocks because their thesis could still be several years away from playing out. The companies they buy may have underperformed recently and also may not screen well.

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In recent years, Buffett and Berkshire have loaded up on energy assets, including oil and gas stocks, even as many industry experts have expressed caution about the price of oil. Does Buffett know something that Wall Street doesn't?

Berkshire's oil and gas acquisitions

Although Berkshire invests in a range of different sectors from banking to tech and artificial intelligence, it's clear that Buffett and his team have been bullish on the energy sector for a number of years now.

Image source: The Motley Fool.

In 2020, Berkshire announced it would spend $10 billion (including the assumption of debt) to purchase the natural gas assets from Dominion Energy, which included all of Dominion Energy Transmission, the Questar Pipeline, and Carolina Gas Transmission. The deal also included half of the Iroquois Gas Transmission System and 25% of the natural gas export-import and storage facility Cove Point LNG.

Last October, in a year where Berkshire hardly put any of its massive cash hoard to work, Berkshire announced it would purchase the remaining 8% of Berkshire Hathaway Energy that it didn't already own.

In its massive equities portfolio, Berkshire has also been busy buying domestic U.S. oil and gas stocks. In 2019, Berkshire purchased its first stake in Occidental Petroleum (NYSE: OXY) by providing the company with $10 billion in financing for an acquisition, in return for preferred shares and warrants. Berkshire hasn't slowed its buying since and now owns nearly 27% of outstanding shares. Occidental makes up 4.3% of Berkshire's portfolio and is the company's sixth largest position.

Berkshire also owns nearly 7% of outstanding shares in Chevron (NYSE: CVX), a position it first launched in 2020. Chevron is Berkshire's fifth-largest equity holding.

By all indications, I would expect Berkshire to keep investing in energy and utility stocks and assets. When Buffett retires from the CEO role at the end of this year, Greg Abel will succeed the 94-year-old, and Abel has run Berkshire Hathaway Energy for a number of years.

What does Buffett know?

Occidental Petroleum and Chevron have not performed well since the beginning of 2020, significantly underperforming the broader market.

CVX data by YCharts

Oil prices have struggled over the last several years for a variety of reasons. Prior to President Donald Trump's current administration, there had been more of a focus on alternative energy and electric vehicles, as more people have grown increasingly concerned about climate change and its effect on the world. There have also been concerns about global demand for oil and the supply and demand dynamics.

The Organization of the Petroleum Exporting Countries and its allies have announced plans to increase production in an effort to retain and reclaim market share from countries it believes are producing too much oil. Meanwhile, the U.S. has significantly increased its fracking and drilling production over the last 15 years and saw oil production last year hit a record 13.4 million barrels per day, which also likely had an impact on supply.

Earlier this year, the U.S. Energy Information Administration (EIA) predicted Brent crude oil prices would average about about $66 per barrel this year and about $59 per barrel in 2026, compared to $81 per barrel in 2024.

So why are Buffett and Berkshire so interested in oil and gas assets? One reason may be geopolitical tensions. Relations in the Middle East have been fragile for many decades now. More recently, there has been significant escalation in the region due to the Israel-Gaza war and the growing conflict between Israel and Iran. Following Israel's recent and surprising strike on Iran's nuclear and military facilities, the price of oil surged to one of its highest in years.

Oil and gas are also viewed as finite resources. In a 2023 report, the EIA estimated that there is enough global supply of crude oil, liquid hydrocarbons, and biofuels to power the world's demand for liquid fuels through 2050. While technology can always change things, growth is expected to slow in the Permian Basin, one of the largest sources of oil production in the U.S.

Buffett and the Berkshire team may view holding U.S. energy assets as quite valuable if supply erodes and alternative energy sources can't fill the gap. Or perhaps they view companies like Occidental and Chevron as candidates to move into alternative energy sources.

Either way, it may not be a bad idea for investors to take a page from Buffett's playbook and build some exposure to U.S. oil and energy assets. These can serve as a hedge if oil prices surge due to escalating conflicts in the Middle East or if supply becomes constrained.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $891,722!*

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*Stock Advisor returns as of June 9, 2025

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Shares of Buffett holding Occidental Petroleum (NYSE: OXY) rallied 6.2% in Thursday trading.

Occidental reported earnings last night, with mixed results. However, investors focused on the profit metric, as Occidental displayed resilient production metrics with more efficient costs. Furthermore, and perhaps even more meaningful than the earnings report, oil stocks were generally up, as the administration announced a trade deal with the U.K. today, spurring optimism that a global tariff-induced recession may be avoided.

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Occidental does more with less

In the first quarter, Occidental reported revenue of $6.8 billion, up 13.7% year over year, and $0.87 in adjusted (non-GAAP) earnings per share (EPS). While the top line slightly missed, investors apparently took comfort in the solid bottom line, which beat expectations by a solid $0.11.

One can thank Occidental's technology chops for more efficiently turning profits, even in a lower oil price environment. In the company's presentation, management noted a 17% improvement in drilling duration per well in the Permian Basin, resulting in 18% lower costs per well. Management also divulged that as a result of efficiencies, it was reducing its Permian rig count by two, and also said it was lowering combined operating and capital expenditures by $350 million this year, with only "minimal" impact to production.

Of note, it was Occidental's huge, low-cost inventory in the Permian along with its commitment to technology enabling lower costs that drew Buffett to invest in the stock.

The lower costs were music to investors' ears, who have worried about profitability in the wake of President Donald Trump's tariff announcements. Since April 2, the price of oil has plunged as recession odds have increased.

However, there was also optimism over tariff and trade negotiations today, as Trump announced the administration's first trade deal, made with the U.K. In a press conference announcing the deal, Trump also said other deals were close to coming to fruition, and that this weekend's initiation of trade talks with China would be "very substantive," saying the current tariff on China "can't go any higher."

In response to the trade deal optimism, the price of oil rose 3.3%. That being said, today's oil price is still a hair below $60 per barrel. In the first quarter, Occidental realized an average price of $71.07.

Image source: Getty Images.

Occidental has been a Buffett laggard

The current share price of Occidental is lower than Buffett's average price, so investors may realize an opportunity if Buffett turns out to be right on the name. That being said, it's still looking like oil and gas stocks may struggle this year.

After all, even if trade deals are struck, the universal 10% tariff on most countries will stick and is new this year, which could slow economic activity. Add in the fact that OPEC+ just increased its production quota two days ago, and the global oil industry appears on the verge of a price war.

That being said, Occidental appears to be one of the most efficient U.S. producers with lots of reserves in the Permian Basin. So, it should remain a strong house, but perhaps on a bad block, in 2025.

Should you invest $1,000 in Occidental Petroleum right now?

Before you buy stock in Occidental Petroleum, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Occidental Petroleum wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,103!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $717,471!*

Now, it’s worth noting Stock Advisor’s total average return is 909% — a market-crushing outperformance compared to 162% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.