If any investor has stood the test of time, it is Warren Buffett. For years, the “Oracle of Omaha” has had a rock-star-like presence in the investing world. His annual Berkshire Hathaway shareholders meeting draws literally thousands of loyal fans who are investors. Known for his long buy-and-hold strategies and his massive portfolio of public and private holdings, he remains one of the preeminent investors in the entire world.
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Despite all the praise for his investing prowess over the past half a century, and the success has been well documented, not even Buffett can ride home a winner when a rate- and inflation-driven bear market hits the stock market. In a somewhat unusual move, Berkshire Hathaway reported earnings last Saturday, and while faring better this year than other companies and indexes, some large parts of the portfolio were stomped.
Buffett, who is a self-proclaimed lover of the insurance industry, saw his insurance underwriting division post a stunning $962 million loss, with car insurance giant Geico taking the biggest pretax hit, down a massive $759 million. Geico has not had a profitable quarter since the second quarter of 2021.
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Overall, Berkshire Hathaway posted a huge $2.7 billion net loss for the quarter, which compared to a gain of $10 billion profit in the same quarter of 2021. There was a gigantic $10.4 billion hit to the overall investment portfolio as a volatile roller-coaster stock market laid the same one-two punch on Buffett and his team that most investors have experienced. The saving grace for the overall portfolio is that earnings of $7.76 billion for the third quarter was a 20% increase over last year, and year-to-date earnings increased 19% over the same period in 2022.
So how did earnings for the quarter come in better and why is Berkshire Hathaway only down about 10% for 2022, versus the S&P 500 loss of over 21%? Two gigantic energy stocks helped buoy the rest of the portfolio. The fact Berkshire Hathaway had such a massive position in these two was a difference maker for sure. Both are “Strong Buy” rated across Wall Street, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and Warren Buffett owns a stunning 163,532,129 shares, or almost 9% of the company. Chevron Corp. (NYSE: CVX | CVX Price Prediction) engages in integrated energy and chemicals operations worldwide.
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
Chevron’s Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.
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The company posted strong third-quarter results, driven by massive global demand for its oil and gas and rising production from its U.S. oilfields.
Chevron stock comes with a 3.10% dividend. Credit Suisse’s $202 target price compares with a $188.04 consensus target and the most recent closing share price of $185.61.
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Occidental Petroleum
Over the past year, Berkshire Hathaway has been buying shares of the company in a massive way. Occidental Petroleum Corp. (NYSE: OXY) engages in the acquisition, exploration and development of oil and gas properties in the United States, the Middle East, Africa and Latin America.
Its Oil and Gas segment explores for, develops and produces oil and condensate, natural gas liquids (NGLs) and natural gas. Its Midstream and Marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide and power. This segment also trades around its assets, consisting of transportation and storage capacity, and it invests in entities.
The Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride.
Earlier this year, Berkshire Hathaway received regulatory approval to buy up to 50% of the stock. The investment giant currently owns 194.4 million shares of Occidental, which is a 20.9% stake. Some reports have indicated Buffet will not acquire a controlling stake. The company is set to report the third-quarter results Tuesday after the close. The stock has been a huge winner for Buffett, as it has doubled in price this year.
Investors receive just a 0.70% dividend. Barclays has an $84 price target on Occidental Petroleum stock. The $75.45 consensus target is less than Monday’s closing print of $75.97, which was up close to 4% on the day.
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The bottom line is that Berkshire Hathaway remains one of the best investment vehicles in the history of Wall Street. Any investors that are only down 10% on what has been one of the worst years for the market in the new millennium are pretty happy. Buffett’s buy-and-hold strategy has paid off in a big way, and the fact that the portfolio also contains top private holdings like Duracell, Dairy Queen, Lubrizol and more keeps investors coming back for more and likely always will.
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