Warren Buffett’s Berkshire Hathaway (BRK.A -1.50%) (BRK.B -1.69%) has had an off year. Through the first eight months of 2022, Berkshire’s shares have lost over 7% of their value. Still, the diversified holding company’s stock has drastically outperformed the broader markets this year. Over this same period, the S&P 500 has dipped by 17.6%, the Dow Jones Industrial Average has retreated by 13.8%, and the Nasdaq Composite has plunged by an unsightly 25.6%.
Berkshire’s relative strength in this brutal market is proof positive that the Oracle of Omaha, along with his investment team, haven’t lost their touch for stock picking. Which Berkshire stocks are the best picks for investors to load up on in September? My two favorite are the high-flying oil and gas company Occidental Petroleum (OXY 0.54%) and the beaten-down tech giant Apple (AAPL -1.36%).
Image source: Getty Images.
Occidental Petroleum: A bull market in energy
Berkshire has been gobbling up Occidental’s shares this year, and it’s no secret why: Rising crude oil prices have been a boon for upstream-focused oil and gas companies like Occidental.
The term “upstream” refers to oil companies focused on the identification, extraction, and production of raw materials. These types of companies generally benefit from rising oil prices, which certainly has been the case for Occidental and its peers in 2022.
Occidental, for instance, has generated a staggering $16.3 billion in free cash flow and paid off a noteworthy $14.9 billion in debt over the five prior quarters — all thanks to skyrocketing oil prices. What’s more, geopolitical unrest and supply chain woes, coupled with ever-increasing demand for fossil fuels globally, have some analysts predicting yet another surge in crude oil prices next year.
Occidental’s stock, as a result, might be trading at a meager 1.6 times 2023 sales right now. By contrast, the average price-to-sales ratio within its peer group is currently 2.48.
This Berkshire-owned oil and gas stock thus appears to have a lot more room to run.
Apple: Buy the fear
The Federal Reserve’s series of interest rate hikes have weighed heavily on technology giants like Apple this year. Its shares have fallen 12.2% through the first eight months of 2022.
Shareholders have grown cautious with the stock this year due to concerns that rising interest rates might tip the U.S. into a recession, which could cause consumers to rethink their discretionary spending for premium priced products such as the iPhone, the Apple Watch, or its noise-canceling AirPods.
That’s the theory at least. In reality, Apple hasn’t shown many ill effects from rising interest rates in 2022, and management isn’t predicting any type of recessionary-influenced drop in annual sales in 2023. Thanks to a series of upcoming product launches such as the latest versions of the iPhone and Apple Watch, the top line is expected to tick higher by a respectable 4.8% next year.
As a result, the company’s shares are only being valued at 24.5 times forward earnings at present. That’s close to Apple’s cheapest level since the COVID-19 bear market in March of 2020. This rock-bottom price hasn’t gone unnoticed by value investors, however. Berkshire, for instance, scooped up nearly 3.9 million shares of Apple in the second quarter of 2022. Savvy investors with a keen eye on value might want to follow that lead on this beaten-down tech stock.
George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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