Warren Buffett became one of the wealthiest people in the world by investing in a small number of big winners. Quite a few of his investments through the years ended up being total duds.
If you browse Berkshire Hathaway‘s (BRK.A -0.59%) (BRK.B -0.29%) portfolio, you’ll find plenty of stocks that aren’t performing well so far in 2022. However, you’ll also spot some that are delivering huge gains. Here are three Buffett stocks to buy that have soared 31% to 104% so far this year.
Buffett began building a position in Chevron (CVX 1.65%) back in the third quarter of 2020. He continued to buy shares in the first quarter of this year. And it’s paid off. The oil stock has jumped 31% year to date and was up as much as 54% in June.
Chevron now ranks as the fourth-largest position in Berkshire’s portfolio. It’s not surprising that Buffett liked the company. Valuations in the energy sector were beaten down considerably during the COVID-19 lockdowns of 2020. Buffett probably anticipated a big rebound as the demand for oil and gas once the restrictions were lifted.
He also no doubt saw the events that have unfolded this year as positive for Chevron. Russia’s invasion of Ukraine caused oil and gas prices to take off. So did Chevron’s profits — more than quadrupling year over year in the latest quarter.
Berkshire scooped up over 2.9 million shares of McKesson (MCK 2.63%) in the first quarter of 2022. In retrospect, that proved to be a smart move. The stock has soared 39% year to date. While much of the gains came during Q1, McKesson’s momentum has continued in recent months.
The stock provided a relatively low-risk way for Buffett to invest in the biopharmaceutical industry. Berkshire has sold off most of its positions in drugmakers. However, McKesson’s pharmaceutical distribution business generates steady and growing revenue without the potential threat of clinical failures.
McKesson CEO Brian Tyler noted in the company’s recent quarterly conference call, “Our business model has remained resilient to the pressures from cost inflation and supply chain disruption.” Buffett loves resilient businesses. McKesson appears to be a great fit for Berkshire’s portfolio.
3. Occidental Petroleum
Chevron isn’t the only oil company that’s high on Buffett’s list these days. He aggressively bought shares of Occidental Petroleum (OXY 2.70%) in 2022. This helped light a fire beneath the stock, which is up close to 104% this year.
Berkshire now owns a 19.4% stake in Occidental. There has even been some speculation that Buffett wants to ultimately buy the rest of the company.
Occidental benefits from the same tailwinds as Chevron. The company has made significant strides toward reducing its debt and has begun buying back shares. Those are actions likely to make Buffett happy.
Why to consider buying these stocks
Just because Buffett likes these three stocks and they’ve all delivered big gains this year doesn’t mean they’re smart picks for all investors right now. However, they’re certainly worthy of consideration.
I think that income investors should especially like Chevron. The oil and gas giant offers a dividend yield of nearly 3.7%. Value investors, on the other hand, could prefer Occidental. Its shares trade at less than six times expected earnings. Both stocks could have room to run over the near term with upside potential for oil prices.
Over the long run, though, McKesson ranks as my personal favorite among these three high-flying Buffett stocks. The company has a solid business model that’s well-suited to perform well regardless of how the economy is doing.
Keith Speights has positions in Berkshire Hathaway (B shares). The Motley Fool has positions in and recommends Berkshire Hathaway (B shares). The Motley Fool recommends McKesson and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.