Andrew Bary
Berkshire Hathaway's equity portfolio is getting a lift in 2026 from its two large energy holdings -- Chevron and Occidental Petroleum. But the company would have done better to have invested instead in a leading energy exchange-traded fund.
Occidental shares have risen 46% this year to $60.63, including a 3.9% gain on Thursday on a continued rise in oil prices, which are up 3% to $110 a barrel in the session based on Brent crude. Chevron has gained 33% this year to $201.81. Both stocks hit new 52-week highs during the Thursday session.
Berkshire began buying the Occidental stock in early 2022 and now holds 265 million shares, a 27% stake, that is worth $16 billion. The Chevron stake, some 130 million shares, is worth around $26 billion.
Unfortunately for Berkshire, Occidental has been the fourth-worst performer among the more than 20 stocks in the State Street Energy SPDR ETF (ticker: XLE) since the end of the first quarter of 2022, gaining 6% while the XLE has risen 65%, led by industry leader Exxon Mobil, which has appreciated 88%. Chevron also is near the bottom of the XLE since then, advancing 23%, Bloomberg data show.
The Occidental underperformance highlights Berkshire's generally subpar U.S. stock picking -- new buys and sells -- over the past six or seven years. It would have done better with ETFs. Berkshire has scored with a group of five Japanese trading companies.
Occidental has been weighed down by higher debt levels than its peers and the need to pay dividends on some $8.5 billion of 8% preferred stock that it issued to Berkshire in 2019 when it needed quick cash in what turned out to be a winning takeover battle with Chevron for Anadarko Petroleum.
To cut debt, Occidental sold its chemical unit, OxyChem, to Berkshire in a transaction that closed in early January, for $9.7 billion.
Barron's wrote recently that the OxyChem deal looks like a winner for Berkshire, given the sharp rally in chemical stocks like Dow this year and an improved outlook for U.S.-based chemical producers due to input pricing advantages over international rivals.
The recent rally in Occidental stock has meant that Berkshire's equity warrants that it got as a bonus as part of the preferred deal in 2019 are back in the money.
Berkshire received 83.9 million warrants to buy Occidental stock with a current exercise price of $59.59 a share. With Occidental stock above $60, those warrants now have intrinsic value. Warrants are long-term call options that give the holder the right to buy a stock for a set period at a fixed price.
Berkshire likely will boost the carrying value of those warrants in its first-quarter financial statements by $500 million or more from their carrying value at year-end of $724 million, Barron's estimates.
The warrants will probably mature in 2030, giving Berkshire four more years to benefit from a higher price for Occidental stock. Berkshire values them using option-pricing models.
Since Berkshire received the warrants in 2019, Occidental has been the worst performer in the XLE ETF, rising 3% against a 127% rise in the ETF.
Berkshire's energy holdings make up more than 10% of its equity portfolio of more than $300 billion, a higher weighting than the 4% energy weight in the S&P 500.
The energy-stock gains are offsetting losses in some of Berkshire's largest equity holdings this year, including Apple, Bank of America, and American Express.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 19, 2026 14:46 ET (18:46 GMT)
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