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Warren Buffett's favorite stock has done an insane 131% this year. Find out if it's worth buying here

Jamie Cameron
2. 11. 2022
4 min read

If Warren Buffett buys something, it's usually a slam dunk. And this was no different. One of his investments has already made 133% this year! And according to many, there's a very good chance it's far from over! Which company is it?

Warren Buffett is unquestionably the most famous investor of our time

The combination of "great performance" and "stocks" may seem like a pretty unrealistic pairing this year. But despite double-digit losses for the major indices in 2022, there are still some individual stocks that have generated significant gains.

The decline in the index is significant

Occidental Petroleum $OXY+0.1% A company that has managed to increase its value by 131% this year. It has come to the forefront of investor interest, especially after legendary investor Warren Buffett took notice and added an additional 5.99 million shares to his portfolio, according to a September 28 Securitiesand Exchange Commission report . Since July, Buffett's investment company, Berkshire Hathaway $BRK-B+1.1%, has bought more than 20 million shares.

Occidental has already gained over 130% this year! Solid!

The big picture

But what's the overall picture? Why do oil company stocks like this one outperform the market so significantly in 2022 ? For one thing, oil prices have hovered around $100 per barrel for most of the first half of the year. Although they have recently started to fall, we are still talking about around $88 a barrel. Natural gas has also seen a general rise this year and extremely high values. We are currently also after a decline and the price is slightly below $6 per million British thermal units, or BTUs. That's up slightly from $2 at this time last year.

Ten-year chart of the oil price. Not long ago we were at ATH. The decline may have come, but we are still near the $90 per barrel mark.
The price of natural gas has also contributed to the rise in these companies. We were at very high prices for almost half the year.

But not everyone agrees with Berkshire, and some influential analysts believe Buffett's stance is a reason not to buy the stock.

"Overall, we think OXY is executing the transformation of its capital structure well and remains well positioned. Unfortunately, extreme stock performance, led by Berkshire Hathaway's common stock purchases, has kept us on the sidelines given the uncertainty about Berkshire's ultimate intentions," JPMorgan analyst John Royall wrote in an investor note last month.

If you're hoping to take a page from Buffett's playbook and cash in on these insanely high earnings, then not many other analysts have entirely good news for you either. Despite the fact that it's widely expected that the energy sector hasn't shown everything yet. But sometimes the statement looks like this...

"A stock with a big year-to-date gain would have made you money if you invested at the beginning of the year, but that doesn't mean it's worth investing now," he said, adding that picking individual stocks carries a lot of risk. "You'll have to do your own analysis of whether the good times will continue for the asset you're considering," warns NerdWallet spokesman Andy Rosen

To be honest, I'd probably expect better advice than not to buy at the top and that stockpicking is risky 😬😂

In general the energy sector is on a roll right now. It is one of the few outperforming the index and everyone knows it. But there is still a consensus among investors that it might not be far from its peak. Occidental in particular, however, was additionally extremely driven by the hype surrounding Warren Buffett's aggressive purchases.

Analysts predict Occidental will report 2022 earnings of $10.24 per share, up more than 300% from last year. Revenues are expected to jump 43% to $37.3 billion in the same period. The company will report Q3 results on Nov. 8, with the FactSet consensus projecting earnings of $2.50 per share. That would represent an impressive 185% year-over-year increase.

The forecast according to CNNMoney then looks like this. Source

Berkshire Hathaway has increased its stake in OXY to 20.9%, and according to SEC filings, that stake could reach more than 25% of shares outstanding. This comes after the Federal Energy Regulatory Commission (FERC) granted Buffett's company approval to buy up to 50% of the energy giant's stock on August 19. Of course, this could also be strong news!

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Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and a few other analyses. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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