When it comes to investing in good times and bad we could all learn a thing or two from Warren Buffett. He began running Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%) way back in 1965 and the conglomerate has delivered an average annual return above 20% ever since.
The oracle of Omaha has made some unusual bets in recent years that are paying off well in 2022. Shares of Occidental Petroleum (OXY 0.82%), Kroger (KR -0.43%), and Bristol Myers Squibb (BMY -8.51%) have risen sharply in 2022, but it probably isn't too late to buy some shares for your own portfolio. At recent prices, you can scoop up any of these stocks for $76 or less per share.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
1. Occidental Petroleum
Buffett knows that abruptly removing millions of barrels of Russian oil from global supply lines will send prices skyrocketing. That's why he's been sinking billions into one of his favorite U.S. oil producers, Occidental Petroleum.
Back in 2019, Occidental Petroleum borrowed heavily to acquire Anadarko with assistance from Berkshire Hathaway. As a result, Occidental was still servicing a $29.4 billion debt load at the end of 2021. Being so heavily leveraged could lead to disaster if global oil prices collapse. It also means there's a lot to gain if prices stay inflated as widely expected.
Shares of Occidental Petroleum have skyrocketed 117% since Russian forces began a full-scale invasion of Ukraine in February. Despite the big run-up, you can still scoop up shares for your own portfolio for around $57 at recent prices.
Before plowing all your cash into Occidental Petroleum or any oil stock, it's important to remember that Russian president, Vladimir Putin, can unilaterally end the war and associated sanctions practically overnight if he so desires. That would be a disaster for Occidental's stock price, but the global economic benefit would likely offset any losses if you keep this stock in a well-diversified portfolio.
2. Kroger
Buffett began acquiring shares of this supermarket chain in February of 2020 and he hasn't looked back for good reasons. Kroger's trounced the benchmark S&P 500 index with a gain of around 92% since Berkshire Hathaway told investors it acquired a large stake. Despite the run-up, you can still buy shares of Kroger for around $57 at the moment.
At recent prices, the stock offers a 1.5% dividend yield that's rising fast. Kroger has been able to bump up its quarterly payout by 75% over the past five years and there is room for more raises ahead. The company has maintained its rising dividend commitment using just 16.5% of the free cash flow generated by operations over the past year.
Kroger's fresh first digital strategy appears to be working better than expected. Digital sales in the fourth quarter of 2021 were 105% higher than during the fourth quarter of 2019.
Kroger was also able to deliver an impressive $3.6 billion in free cash flow during 2021 even though it significantly raised employee wages. With one of the country's largest grocery distribution networks running like a well-oiled machine, the company has a good chance to continue outperforming for many years to come.
3. Bristol Myers Squibb
The COVID pandemic reminded Buffett just how valuable drugs can be. In 2020, Berkshire Hathaway began raising its exposure to a handful of big pharmaceutical companies including Bristol Myers Squibb.
Shares of Bristol Myers Squibb have climbed around 21% this year even though the S&P 500 index has tumbled by more than 10% in 2021. Despite rising sharply, you can still buy this dividend-paying pharma stock for about $76 per share. At this price, the company's dividend program offers a 2.9% yield.
Bristol Myers Squibb might not have any COVID-19 vaccine revenue to lean on. What it does have is three of last year's 10 best-selling drugs. Its top product at the moment, Revlimid, produced $12.8 billion in revenue last year and it won't lose patent-protected exclusivity for at least a few more years.
