Warren Buffett's Berkshire Hathaway made a $2 billion misstep by dumping Occidental stock then piling back in 18 months later

• Berkshire Hathaway made a $2 billion error by selling Occidental Petroleum stock in 2020.
• Warren Buffett's company sold nearly 48 million shares for less than a quarter of their value today.

Warren Buffett's Berkshire Hathaway made a $2 billion misstep by selling its Occidental Petroleum stock in 2020, a Markets Insider analysis of Securities and Exchange Commission filings shows.

The famed investor's conglomerate has spent about $10 billion to purchase 188 million Occidental shares this year, giving it a 20.2% stake in the oil-and-gas explorer and producer.

However, it could have saved a fortune by hanging onto a previous holding of Occidental shares, instead of dumping it in 2020 then rebuilding it at triple the price in recent months.

Berkshire paid an estimated $810 million to buy 18.9 million common shares of Occidental in the second half of 2019, based on the energy company's average closing stock price in the period.

Buffett's company received another 28.8 million shares in 2020, after Occidental opted to pay $400 million of preferred-stock dividends to Berkshire in the form of common stock instead of cash. Occidental owed the dividends as part of a $10 billion financing deal it struck with Berkshire in 2019, and wanted to preserve its cash reserves.

Berkshire sold its entire position of nearly 48 million Occidental shares for about $720 million during the second and third quarters of 2020. If the conglomerate had retained those shares, they would have quadrupled in value to $3.1 billion as of Monday's close.

Occidental's stock price has doubled this year alone, to about $65, as Russia's invasion of Ukraine continues to disrupt global energy supplies and drive fuel prices higher.

Berkshire's Occidental stock purchases this year mean it has effectively rebought the shares it sold for about $2.5 billion — three times what it laid out in 2019.

It has paid a weighted average price of $53 per share to build its stake this year, or more than triple Occidental's average closing price of $15 during the two quarters when Berkshire sold in 2020.

Of course, Buffett and his team couldn't have known oil prices would surge within two years of their Occidental exit, revitalizing the company's prospects. Still, they lost out on nearly $2 billion in profits by selling their Occidental stake in 2020, and ended up spending an extra $1.7 billion to rebuild it this year.

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