Warren Buffett’s Energy Shift: Why Utilities May Not Be His Top Play in 2025

Warren Buffett’s recent portfolio moves have sent ripples through markets, signaling a strategic pivot from tech to energy. But what about utilities—a historically stable sector? The Moomoo Community’s analysis reveals that while utilities fit Buffett’s defensive investing philosophy, they’re not a focal point of his 2025 strategy. Instead, he’s betting big on oil, batteries, and inflation-resistant assets. Here’s why utilities might be losing their luster—and what investors should consider.

Ask Aime: Will utilities be Warren Buffett's next target?

Buffett’s Energy Play: A Contrarian Bet on Oil

Buffett’s $10 billion subordinated loan to Occidental Petroleum (OXY) and subsequent stock purchases highlight his contrarian view of oil prices. Despite a potential Trump-led price drop to $60–65/barrel by 2025, the Moomoo forecast projects Brent crude stabilizing at $85–90/barrel, driven by OPEC+ discipline, Chinese demand, and constrained shale output.

Ask Aime: What is Warren Buffett's current strategy for the energy sector, and how does it differ from his past investments?

This alignment with oil’s floor price ensures Occidental’s profitability remains intact. The company’s low-cost shale assets and debt-restructured balance sheet position it as a winner in a low-price environment, offering a $50 billion valuation upside if prices stay within the predicted range.

Why Utilities Take a Backseat in 2025

While utilities are traditionally seen as a “defensive” sector—offering stable cash flows and dividends—Buffett’s 2025 portfolio avoids them for three key reasons:

1. Scale and Growth Constraints:
   Utilities like Black Hills Corporation (BKH) may offer a 4.4% dividend yield (vs. the S&P 500’s 1.3%), but their small market caps (e.g., BKH’s $4.4B valuation) lack the size to move the needle for Berkshire’s $1.1 trillion conglomerate.

2. Competing Opportunities:
   Buffett’s cash reserves ($334B by late 2024) are prioritized for high-yield, inflation-resistant assets like Japan’s trading companies (e.g., Mitsui & Co.) and battery tech leader BYD (BYDDY), which offers a 95% gross margin. Utilities, while reliable, don’t match the growth potential of these sectors.

3. Regulatory and Market Risks:
   Utilities often operate in tightly regulated environments with capped profit margins. The Moomoo analysis notes that while this ensures stability, it also limits upside in a high-growth scenario—a trade-off Buffett may deem unfavorable.

The Case for Utilities as a Diversification Tool

Even if Buffett isn’t doubling down on utilities, the sector retains value for individual investors seeking defensive exposure. The Motley Fool highlights Black Hills (BKH) as a “Dividend King” with 55 consecutive annual payout increases. Its 3x faster customer growth than the U.S. population and regulatory-approved rate hikes position it to deliver 4–6% annual earnings growth.

For retail investors, pairing a utility like BKH with Buffett’s core holdings (e.g., Chevron, BYD) could balance risk. Utilities’ low volatility and steady income act as a hedge against energy’s cyclical swings.

Risks and the Buffett Paradox

Buffett’s strategy isn’t without risks. A sharper-than-expected global slowdown or a prolonged oil price drop below $60/barrel could pressure Occidental’s valuation. Meanwhile, utilities’ slow-and-steady growth offers insulation against such volatility.

The paradox? Buffett’s focus on oil and tech divestitures (e.g., Apple) reflects a belief that energy’s recovery will outpace utilities’ defensive appeal. Yet, his own cash-heavy position (50% of Berkshire’s portfolio) suggests he’s prepared to pounce on undervalued assets—including utilities—should market corrections arise.

Conclusion: Follow Buffett’s Philosophy, Not Just His Portfolio

Buffett isn’t dismissing utilities outright; he’s prioritizing sectors with asymmetric upside. For investors, the lesson is clear: utilities remain a defensive staple but may not offer the growth Buffett seeks in 2025.

• Buffett’s Edge: His $334B cash reserves allow selective bets on high-yield, inflation-resistant assets (e.g., BYD’s batteries, Japan’s trading firms). Utilities lack the scale to compete.
• The Data: Black Hills’ 4.4% dividend yield and 55-year dividend streak align with Buffett’s value principles, but its small size limits Berkshire’s interest.
• The Play: Pair utilities like BKH with energy and tech winners to balance risk.

In 2025, Buffett’s energy bet is a calculated gamble on oil’s resilience. Utilities, while steady, are a supporting act—not the star—of his strategy. For now, investors should heed his cash-heavy stance and focus on diversification.