Occidental Petroleum (OXY 1.80%) is crushing the market so far this year. Shares of the oil and gas producer have skyrocketed nearly 40%, even with a pullback over the last few weeks. Meanwhile, the S&P 500 (^GSPC +1.18%) index has clawed its way back to a low single-digit percentage gain.
Most energy stocks have moved significantly higher in 2026. Occidental, though, ranks among the biggest winners year to date. But is it the smartest stock to buy right now?
NYSE: OXY
Key Data Points
Why Occidental is winning
The easy answer for why Occidental's shares have performed so well this year is the U.S. war with Iran. The conflict has rattled global energy markets, driving up demand for U.S. oil and gas. As a major producer in the Permian Basin, the Rocky Mountain region, and the Gulf of Mexico, Occidental has been an immediate beneficiary of the Middle East supply disruption.
However, the Iran war has helped most energy stocks. Why has Occidental risen more than its peers? I think four reasons stand out in particular.
First, Occidental's fortunes hinge more on oil prices than giant integrated oil companies such as Chevron (CVX 1.51%) and ExxonMobil (XOM 0.29%). Second, Oxy is producing record levels of oil -- 1,434 Mboed (thousand barrels of oil equivalent per day).
The other two factors behind Occidental's appeal to investors are directly related to Berkshire Hathaway (BRKA 0.22%) (BRKB 0.53%). In January, Berkshire bought OxyChem for $9.7 billion. This deal enabled Occidental to slash its debt, thereby greatly improving the company's balance sheet. Berkshire Hathaway also owns a 26.7% stake in Oxy. Such a stamp of approval from Warren Buffett can do wonders for any stock.
Image source: Getty Images.
The smartest choice for investors?
Do all of these positives make Occidental Petroleum's stock the smartest choice for investors? Not necessarily. It's also important to consider valuation. After its impressive run, Occidental's shares trade at roughly 40 times forward earnings, well above most of its peers.
Wall Street appears hesitant to buy the stock, too. Of the 26 analysts surveyed by S&P Global (SPGI +0.17%) in April, eight rated Occidental as a "buy" or "strong buy." Fifteen analysts recommended holding Oxy. The remaining three analysts rated the stock as an "underperform" or "sell."
I don't think Occidental's high multiple is a reason for long-term investors to sell the oil stock. However, I don't view the stock as the smartest pick for investors. Other stocks (including some in the energy sector) offer better risk-reward propositions than Occidental does right now.
