The Perfect Storm: Wars Are Driving Energy Stocks Like Occidental Petroleum, American Atomics, and First Solar

Occidental Petroleum: Buffett's Favourite

While Occidental Petroleum is not the largest publicly traded stock, it is one of the most popular among value investors. That is because Warren Buffett has been invested in the company through his vehicle, Berkshire Hathaway, since 2019. Over time, the investment legend has expanded his position. Today, Berkshire holds nearly 33% of the shares. In addition, there are preferred shares worth approximately USD 8.3 billion. "Oxy" is gradually buying these back. Although there is recurring speculation that a full takeover is possible, Buffett has made it clear that he does not intend to buy the company outright. He is now chairman of Berkshire, and his successor as CEO might have a different perspective. After all, Berkshire now sits on a cash reserve of well over USD 350 billion.

Meanwhile, Occidental Petroleum is delivering strong operating performance. The company benefited from sharply rising oil prices due to the war in the Gulf. Earnings per share came in at USD 1.06, well above analysts' consensus estimate of USD 0.60. Production continued at full capacity. Average output reached 1.426 million barrels of oil equivalent per day (Mboe/d), placing the company at the upper end of its own production guidance. In the wake of the Anadarko acquisition and the pandemic, Occidental had drastically cut its dividends. Things have been looking up again for a few years now. A dividend of USD 0.26 per share was paid out for Q1.

Operationally, Occidental continues to focus on its core business and optimizing its portfolio. The chemicals business was sold to Berkshire Hathaway, as debt reduction remains the top priority. For this reason, there is currently no share buyback program.

Occidental Petroleum's stock fell by about 10% after its April high. However, following the correction, it is now back on a tentative upward trend. Since further volatility in the oil market is likely this year, the company, founded in California in 1920, is well-positioned. The majority of its business is in North America.

American Atomics: When will the stock break out?

There is also a lot happening in the nuclear energy sector. The Chinese are currently building dozens of nuclear power plants. And even Three Mile Island is set to come back online. Behind this is the AI industry's enormous demand for computing power—and thus for energy. The government in Washington aims to ramp up capacity to as much as 300 gigawatts by 2050. And with that, the issue of uranium is back on the agenda. As early as 2024, under Biden, Congress had already decided to stop importing uranium from Russia by 2028. That share accounted for about one-fifth of US demand.

Accordingly, massive investments are being made in domestic uranium mining. In addition, Canada is seen as a major partner. The Maple Leaf Nation is one of the world's largest uranium producers. American Atomics is one of the companies looking to capitalize on this opportunity in the US. The management aims not only to mine uranium for the US market but also to become a vertically integrated company. The plan is to process the material in-house, thereby securing a larger share of the supply chain.

The Big Indian project in Utah serves as the starting point. It is located in a historic uranium mining area, the Lisbon Valley Mining District in the southeastern part of the state. Here, American Atomics already owns more than 200 contiguous claims. Furthermore, the company has already taken concrete steps and found an experienced partner in CVMR for processing the material. Together, they plan to build a modern uranium mill on the property.

American Atomics' stock has been trading sideways for months and is currently at the lower end of that range. Its market capitalization is just CAD 13 million. Anyone who believes in the US uranium industry's comeback can bet on this stock.

First Solar: Boom Thanks to Data Centers

An energy mix is always necessary. There is simply no other way in the modern world. And the same applies to the expansion of AI data centers. The US power grid today is not designed to meet the enormous demand. As a result, many AI hyperscalers are turning to decentralized solutions. Alongside natural gas, solar energy also plays a major role. In this vast country, which is already blessed with sunshine in the south, the sector has been booming for years—despite headwinds from Washington. This is helped by the fact that solar energy is gradually becoming more affordable, as economies of scale in mass production become increasingly evident and the technology continues to advance.

In the US, AI data centers with attached solar farms and battery storage are definitely in vogue right now. The preferred partner here is First Solar, the market leader in the US. It is benefiting greatly from the expansion of AI data centers. The Arizona-based company recently equipped a Microsoft data center in Arizona. In this regard, the company is currently experiencing a boom. In addition to its sheer size, the company's proprietary technology is also a key advantage. First Solar relies on thin-film modules, which are considered highly efficient at high temperatures. They lose significantly less efficiency than traditional silicon panels and thus ensure a consistent energy supply.

First Solar currently has a market capitalization of approximately USD 24 billion. In Q1, the company's revenue grew by 24%. The stock has lost nearly a third of its value since its annual high at the end of May. This presents opportunities for investors looking to establish a long-term position in the sector.

Occidental Petroleum is not only Buffett's favourite but also one of the most stable oil companies in the US. However, its ongoing debt reduction efforts are still holding it back. With American Atomics, investors are betting on the expansion of uranium production in the US. The industry also continues to receive tailwinds from Washington. First Solar is the solar champion in North America and is currently benefiting from an AI-driven boom. If analysts' estimates for AI prove accurate, the company should continue to benefit from this for years to come.