Bottom-fishers who bought Occidental Petroleum (NYSE:OXY) at its novel coronavirus pandemic lows have seen their patience pay off recently. Even those who got into OXY stock “late” — after oil began to bounce back — are sitting on significant gains.

But now, whether you own it already, or looking to take an initial position, you may be wondering what’s the best move. After all, this is a unique situation, in that the “smart money” is both buying and selling. One legendary investor in Carl Icahn cashed out. Meanwhile, a far wealthier, more famous investing legend in Warren Buffett added to his position.

It’s also a situation where economic reality, not hype, has justified its big bolt. The Russian invasion of Ukraine, and the subsequent Western sanctions against Russia, sent crude oil prices to multi-decade highs earlier this month. On the other hand, crude prices are now pulling back. Nonetheless, it’s unclear how long all of this will last.

Depending on your bullishness — on both energy prices and the impact it will have on Occidental’s financial performance — you may still find it worthwhile to enter/hold onto a position. Just don’t be surprised if it swings wildly, after its latest parabolic moves.

The Latest With OXY Stock

Overall, external factors have been in the driver’s seat with Occidental Petroleum over the past month. In fact, it’s the recent big moves for crude oil and natural gas prices that have fueled its big move higher. Not company-specific developments.

The Buffett news has also helped to keep OXY stock at levels not seen since before the pandemic. News of the “Oracle of Omaha” making it a buy is a promising sign. This has helped to drown out the news of Icahn’s sale, which without the Buffett news would raise concerns over whether shares had topped out; Although, Icahn has sold too early in a big way twice in recent years.

That said, I wouldn’t buy Occidental simply because of the Russia situation, or because it’s now a Warren Buffett stock. Instead, the focus should be on its fundamentals. Has the rise in oil prices, plus other improvements the company has made, made it a more valuable enterprise?

More importantly, if these changes have materially improved its underlying value, is it not yet fully reflected in its current stock price? Taking a look at its earnings potential, and debt reduction efforts, this may be the case.

Occidental and Additional Upside Potential

Although OXY stock — trading at more than $55 per share right now — is up more than six-fold from its 2020 lows, shares are still a far cry from where they were less than five years back.

You may not remember, but while the pandemic helped to cause its capitulation, a big mistake the company made already had it on a downward trajectory. I’m talking about its ill-timed acquisition of Anadarko Petroleum. A deal that, interestingly enough, was financed by Buffett with the preferred stock referenced above.

Overpaying for the company, the deal saddled it with tremendous debt, right on the eve of oil going from $60 per barrel to briefly negative prices. Crude’s stunning rebound, and hitting of prices north of $100 per barrel, has obviously helped to save the day. Per analyst estimates, if oil prices stay high, OCX stock could earn as much as $9.56 per share this year. That’s just under $9 billion in net income.

Furthermore, the company is already smartly using its cash flow to de-lever. A possibly big jump in earnings/cash flow will enable it to pay off a large chunk of the $25 billion in debt it expects to have outstanding at quarter’s end. It may too be able to use some of its cash to buy back the aforementioned preferred stock held by Buffett, which totals $10 billion. Together, both factors — high earnings and lower debt — could help it get back to pre-Anadarko prices of around $80 per share.

Bottom Line on OXY Stock

Although Icahn has taken the money and ran, Occidental may have room to add to its recent big gains. This explains why Buffett has increased his wager on the company.

Nevertheless, I wouldn’t be too confident that it’s a straight shot from the high-$50s back to the $80-per-share range. If oil pulls back further after its Russia spike, we may see the stock retreat a bit. The market’s absorption of the Buffett news could cause a pullback as well.

In short, if you already own OXY stock, you may just want to hold, and not add to your position. If you don’t own it yet? You may want to wait to buy it on weakness.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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