Dave Gilbert here, Editor of Smart Money.
After yet another rough day in the market, you’d be thrilled to own the best-performing stock in the S&P 500 this year, right?
When the market itself is down more than 20% and the stock is up more than 90%… it’s a no brainer.
Even after that big run, the quintessential value investor himself – Warren Buffett – is buying more of this stock.
The stock is Occidental Petroleum Corp. (OXY), and Buffett’s company, Berkshire Hathaway Inc. (BRK-A), recently purchased 12 million shares for almost $700 million.
Berkshire now owns 18.7% of Occidental’s common stock, and some analysts speculate that Buffett and his partners might try to buy the whole company.
It’s news any time the Oracle of Omaha makes a move, and why wouldn’t it be? From 1965 through 2021, Berkshire has a compound annual return of 20.1%, which is basically double the S&P 500’s 10.5% return.
Beating the market 2-to-1 for 56 years is extraordinary. No wonder Buffett himself is worth nearly $100 billion.
If we dig a little deeper into this latest move, we see that a pattern emerges…
If You Think the Market Has Been Shaken Up… Get Ready for What’s Next
Two Wall Street legends predict that, years from now, you’ll always remember what you were doing when this unveiling goes live.
Because a trend they’ve been following for 40 years could take a turn that will forever define who saw it coming, who had their money there first… and who missed it completely.
If nothing else, you can get their free recommendation now.
Combined – these two legends have recommended 37 different stocks that rose more than 1,000%.
Energizing Your Portfolio with the Best-Performing Stocks
With the increased investment in Occidental Petroleum, that stock now makes up 3.2% of the Berkshire Hathaway portfolio. Another oil and gas company, Chevron Corp. (CVX), is more than double that at 6.9%.
Two oil and gas companies comprise 10% of the more than $900 billion portfolio.
What’s more, the other best-performing stocks in the S&P 500 so far this year are also energy companies. These stocks round out the top five:
- Constellation Energy Corp. (CEG): 39%
- Coterra Energy Inc. (CTRA): 36%
- Exxon Mobil Corp. (XOM): 32%
- Valero Energy Corp. (VLO): 30%
In fact, 10 of the top 20 best-performing stocks year-to-date are energy stocks… and that includes a pretty sharp drop over the last month as oil prices have fallen back under $100 a barrel – for now.
An industry as old as oil doesn’t come to mind when thinking about the best opportunities in the market today, which is why Eric fears that many investors will look right past it. Here’s what he wrote to his Investment Report readers last December…
For most folks, oil stocks belong in the company of iconic American memorabilia like Hula Hoops, drive-in movie theatres, and TV commercials about the cigarette brands doctors prefer most.
They each enjoyed their moments in the sun, but those days have long since passed.
Oil stocks, like Hula Hoops, still exist of course, but neither one enjoys the widespread popularity of bygone eras.
Everywhere you look, the world is turning away from fossil fuels and turning toward renewable energy technologies. Because of this powerful megatrend, many folks assume oil stocks (and the returns they can deliver) are a thing of the past.
But oil stocks may not be as passé as most folks assume. Like the Rolling Stones, they probably have a few solid performances left in them.
Admittedly, the oil-centric world of locomotion is shuffling toward obsolescence… but it’s not there yet. No one is lining up to board all-electric Boeing 787 Dreamliners.
To put it simply, the road to a $10-per-barrel oil price might pass through $150, or even $200, on the way.
I understand that many investors may have little interest in buying an energy stock. I get it. I don’t have much interest in recommending an energy stock.
But the near-term bullish backdrop has become too compelling to ignore.
In the first issue of 2022, Eric named oil’s swan song as Power Trend No. 1…
In the here and now, demand for oil during the last several months has been rebounding sharply. As it continues to rebound, it could reach about 104 million barrels per day (MBPD), which would be about two MBPD higher than the world’s oil producers have ever supplied to the market.
Most folks assume that OPEC and others could easily ramp production to satisfy any significant surge in demand. But that assumption rests on a frail statistical foundation.
The U.S. has supplied almost all of the world’s crude production growth during the last decade, not OPEC. Pulling that rabbit out of the hat a second time will not be easy, as U.S. shale production topped out two years ago.
Furthermore, oil and gas companies have been slashing the exploration budgets for many years. As I mentioned in last month’s issue, global investments in oil and gas exploration and production have plummeted by about 65% since 2014.
Net-net: Bountiful new supplies of crude oil seem highly unlikely.
A tightening oil market, coupled with a rising inflationary trend, provides ample reason to expect oil stocks to deliver market-beating results in 2022.
He’s certainly been right so far, and he provided all of this analysis before Russia’s invasion of Ukraine, which put even greater constraints on supply around the world.
All of this is why Eric sees the drop in oil prices related stocks as an opportunity. It seems that Warren Buffett would agree; both recognized the opportunity before the pullback.
Buffett would probably tell you that he focuses more on individual companies, but you know he doesn’t ignore its industry. Eric focuses more on the megatrends driving the industry, but he also carefully analyzes each company.
Most important right now, both look beyond present volatility and price fluctuations and can see the likelihood of much higher prices in the future.
That has enabled them to build wealth for themselves through the years… and to help others do the same.
Sincerely,
Dave
P.S. He predicts the nightmare of Mar. 23, 2020 is about to repeat…
But in a bizarre new way that could create millionaires on a single investment, if you’re willing to take advantage of this year’s panic.
Remember: Mar. 23, 2020 was the most brutal day of the 2020 Crash.
It was a day when even the most beloved companies had suffered a severe drop, while other stocks began the first step toward astronomical new highs.
This summer, Louis Navellier predicts it will happen again.
Get all the details now – before it’s too late.
On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.
