Berkshire Hathaway Stock Hits a Record High. Buffett Can Thank Occidental, Not Apple.

It’s news that might have been missed on a manic day for markets. Wednesday saw Hong Kong stocks notch the biggest gains since 2008 and U.S. investors reacted to a hotly anticipated interest rate increase from the Federal Reserve. But Berkshire’s growing interest in Occidental is worth paying attention to.

As Barron’s has reported, the conglomerate holding company run by the 91-year old CEO Buffett has been on an “uncharacteristically aggressive buying spree” with Occidental; Buffett is typically less public about his purchases.

Having bought more than 18 million shares in Occidental this week — and more than 100 million shares since March 2 — Berkshire’s interest in the group now stands at 14.6%, or 136.4 million shares. 

There is speculation that Buffett might want to buy the whole company. Nevertheless, shares in both the investment group and its latest darling have been rising. 

Berkshire’s Class B stock — the one most commonly held by retail investors —rose 1% Wednesday; it was trading flat in premarket trading Thursday. Berkshire’s Class A shares hit a record high on Wednesday of $504,036, up from around $20 when Buffett took the helm at Berkshire almost 60 years ago.

Recent increases in Berkshire’s share price — the stock has gained almost 12% this year, compared to a 9% fall in the wider S&P 500 index — has come despite the fact that its single-largest holding is down in the dumps.

Berkshire owns some 5% of Apple (AAPL) in a stake it mostly built between 2016 and 2018, and in the past has ridden the coattails of the iPhone maker as its shares have gone higher and higher. Buffett’s success in 2022 is all the more notable since Apple stock has fallen more than 12% so far this year, caught up in a broader selloff in the tech sector.

The gains are much more staggering for Occidental, which ticked up 3% in Thursday’s premarket after slipping more than 2% Wednesday. The shares are up some 13% since Berkshire began building its big stake at the beginning of March.

As an oil company, Occidental has benefited from an intense surge in oil prices linked to the Russia-Ukraine war, which has also lifted the stocks of peers like Exxon Mobil (XOM), Chevron (CVX), and ConocoPhillips (COP). 

Even relative to its peers, Occidental’s rise is eye-watering. While Exxon stock has climbed more than 20% in 2022, with Chevron and Conoco in the gain-range of 30%, shares in Occidental are up more than 70% so far this year.

And analysts continue to be bullish on the stock. Occidental is overwhelmingly rated at Buy among brokers surveyed by FactSet, though the recent climb in the share price has diluted future gains implied by analysts’ target prices.

The average target on Occidental stock is $53.56, implying a 1% rise from Wednesday’s closing level but slightly short of where the shares are set to open on Thursday.

Write to Jack Denton at [email protected]