Berkshire Hathaway has returned to trouncing the market in 2022. Roughly halfway through the year, CEO Warren Buffett's company is down roughly 9%, while the S&P 500 index has slid roughly 21% across the stretch.
The investment conglomerate's year-to-date performance might not sound like cause for celebration, but it looks pretty good in context, and the company has some holdings putting up very strong performance amid the challenging backdrop. Read on for a look at two companies in the Berkshire Hathaway portfolio that are posting eye-catching performance despite the tough market conditions in 2022.
1. Occidental Petroleum
Berkshire Hathaway helped finance oil company Occidental Petroleum's (OXY -1.65%) acquisition of Anadarko Petroleum in 2019 through a roughly $10 billion investment. With the oil and gas market having rebounded from pandemic-related headwinds and now benefiting from record pricing levels, Buffett and Berkshire have ramped up their investment in Occidental.
Despite the tough backdrop for the market at large, Occidental's share price has more than doubled this year. It's not hard to see why investors are excited. With energy prices surging, expectations for this year's earnings have soared, and the jump in expected profits for next year is even more eye-catching.
The Oracle of Omaha seems to be betting that oil prices will remain high in the near future. Buffett loaded up on more Occidental Petroleum shares in the first quarter and, as disclosed in recent filings, has continued to add to its position in the company. Occidental currently accounts for roughly 3.6% of Berkshire's stock portfolio and stands as Berkshire's sixth-largest stock holding.
Buffett's company currently owns roughly 16.4% of the energy company's outstanding shares, and some investors think that Berkshire may be on track to acquire Occidental outright. In addition to its stock position, Berkshire also holds Occidental warrants, giving it the ability to purchase more stock at a price of roughly $59.62 per share. If Buffett opts to exercise those warrants, Berkshire would own a roughly 25% stake in the oil company.
With signs suggesting that gas prices are likely to remain high and a potential buyout on the table, Occidental could continue to significantly outperform the broader market in the near term.
2. Activision Blizzard
Berkshire Hathaway initiated a position in Activision Blizzard (ATVI) shortly before Microsoft announced in January that it had signed a deal to acquire the video game publisher for $68.7 billion. Provided the deal goes through, it will become Microsoft's largest-ever acquisition.
As of Friday's close, Activision Blizzard is up 18% year to date and 20% since the announcement of the deal with Microsoft. However, with Activision's stock currently priced around $78 per share and Microsoft set to buy the publisher for $95 per share in an all-cash deal, the stock still has 21% upside at current prices. The deal is expected to close in the first half of 2023.
At its annual shareholder meeting, Berkshire revealed it had purchased even more of the game company's stock -- signaling high conviction in the likelihood of the deal going through. With its ample cash reserves and dependable management team, Microsoft is a reliable purchaser, and the all-cash nature of the deal means that investors won't be exposed to potential fluctuations of the tech giant's share price in the event of ongoing market volatility.
On the other hand, the acquisition still needs regulatory approval, and some investors are betting that antitrust issues will ultimately cause it to fall apart. While Microsoft has plenty of strong competition in both the gaming industry and broader technology space, the fact that Activision Blizzard can be purchased at such a significant discount compared to the buyout price makes it clear the market believes there is still significant risk here.