Investing Ideas

Berkshire Hathaway's Acquisition of Stock in a High-yield O&G Company is Attracting a Lot of Investor Interests

Warren Buffett's Berkshire Hathaway purchased just over 51,000 shares in oil and gas company Vitesse Energy (VTS) in the first quarter 2023.

No, it's not a significant position for Berkshire – the current value is just over $1.1 million. However, it is intriguing for retail investors who want to follow the oracle of Omaha into a stock currently yielding 9.5%. So let's look at Vitesse and why it might attract income-seeking investors. The stock has all the hallmarks of a Buffett value stock purchase. The key to this argument is as follows:

It's an investment decision that relies on Berkshire's confidence in an experienced management team. It's a shareholder-friendly company, with management aiming to grow dividends over time and expecting to initially “pay quarterly cash dividends and dividend equivalents totaling approximately $66.0 million per fiscal year” – equivalent to $2 per share.

Management diversifies risk in its business model, ensuring free-cash-flow generation is returned to investors in the form of buybacks and dividends. So it's a classic “value” investment because the downside is limited, while the upside is significant.

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