Berkshire Hathaway, owned by Warren Buffett (BRK.A -0.26%; BRK.B -0.39%), has not had a good year. Over 7% of the value of Berkshire’s shares has been lost in the first eight months of 2022. However, the stock of the diversified holding company has performed much better than the general markets this year. The S&P 500 has decreased 17.6% over this time, the Dow Jones Industrial Average has fallen 13.8%, and the Nasdaq Composite has fallen an ugly 25.6%.
The relative resilience of Berkshire in this turbulent market is unequivocal evidence that the Oracle of Omaha and his investment team still have a knack for choosing winning stocks. Which equities from the Berkshire Hathaway portfolio are the greatest choices for investors to buy in September? The soaring oil and gas business Occidental Petroleum (OXY -2.75%) and the battered technology behemoth Apple (AAPL -0.82%) are my two favorites.
Occidental Petroleum: A bullish energy market
It’s no secret that Berkshire has been snatching up Occidental’s shares this year because upstream-focused oil and gas businesses like Occidental have benefited from rising crude oil prices.
Oil firms engaged in the discovery, extraction, and production of raw materials are referred to as “upstream” companies. These businesses often profit from increased oil prices, which Occidental and its competitors have unquestionably seen in 2022.
Because of the sharp increase in oil prices, Occidental, for example, has earned remarkable $16.3 billion in free cash flow and paid down a significant $14.9 billion in debt during the previous five quarters. Furthermore, some experts believe that crude oil prices will rise again next year due to geopolitical upheaval, supply chain issues, and the world’s growing need for fossil fuels.
Thus, it seems like this oil and gas stock held by Berkshire has a lot more space to grow.
Apple: Purchase the fear
Technology behemoths like Apple have been negatively impacted this year by the Federal Reserve’s ongoing interest rate increases. Through the first eight months of 2022, its shares have decreased 12.2%.
Due to worries that rising interest rates could push the United States into a recession, which would make consumers reconsider their discretionary spending on high-end products like the iPhone, the Apple Watch, or its noise-canceling AirPods, investors have become more cautious with the stock this year.
At least, that is the theory. In truth, Apple hasn’t seen many negative consequences from increasing interest rates in 2022, and management isn’t forecasting any kind of decline in yearly sales in 2023 due to a recession. The top line is anticipated to increase by a healthy 4.8% next year thanks to a number of major product releases, including the most recent models of the iPhone and Apple Watch.
As a consequence, the current valuation of the company’s shares is just 24.5 times anticipated earnings. That is not much below Apple’s lowest point since the COVID-19 bear market bottomed out in March 2020. But value investors have taken note of this absurdly low price. For instance, Berkshire purchased approximately 3.9 million Apple shares during the second quarter of 2022. That lead on this undervalued tech company may be worth following for astute investors with a good eye for a bargain.