Warren Buffett purchased more than 20 million shares of this stock in 2022. And it has a 133% return. But can that growth sustain?

Great performance and stocks may seem like contradictory terminology this year. But despite double-digit losses from major indexes in 2022, there are still some individual stocks that have generated sizable gains. When it comes to price performance, one has even managed a triple-digit growth. Pros, however, are not sold on its longevity — and instead say you may want to consider other alternatives. 

Houston, Texas-based hydrocarbon exploration company Occidental Petroleum Corp., or OXY, managed an overall price performance increase of 133.7% so far this year, Morningstar data show. Famed investor Warren Buffett took notice of it, adding 5.99 million shares to his portfolio, according to a Sept. 28 SEC filing. Since July, Berkshire Hathaway, Buffett’s investment firm, has purchased more than 20 million shares of the stock. 

So why are petroleum stocks like this one outperforming the market by so much in 2022? For one, crude oil prices for much of the first half of the year have hovered around $100 per barrel. Although they have recently started to decline — to roughly $86 per barrel as of Oct. 17, according to Bloomberg data — natural gas has also seen a general uptick this year, reaching $7.88 per million British thermal units, or BTUs, at the end of September, government data show. That’s up from a little under $2 this time last year.

Ready to cash in? Pros say proceed with caution

If you’re hoping to steal a page from Buffett’s playbook and cash in on these crazy-high gains, NerdWallet investing spokesperson Andy Rosen has a dire warning. “A stock with a big year-to-date gain would have made you money if you invested at the start of the year, but that doesn’t mean it’s going to pay off if you invest now,” he said, adding that selecting individual stocks comes with plenty of risks. “You’ll have to make your own analysis about whether the good times are going to continue for the asset you’re considering.”

Eventually the ride will come to an end, a timing game that may just be too much of a risk for most retail investors, said Peter Krull, CEO, Earth Equity Advisors. “While there are many examples of people who have made bets on a single stock and benefitted handsomely, there are just as many who have lost,” Krull said. “The most prudent investment principle is to own a diversified portfolio.”

Or you can take another page from Warren Buffett’s playbook, this one targeted to most investors. “In my view, for most people, the best thing to do is owning the S&P 500 index fund,” Buffett said a few years back. And he is also a believer — at least for most investors — in thinking long term. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes,” he has said. 

But if you do want to pick individual stocks, here is some of his advice: “I don’t think most people are in a position to pick single stocks,” Buffett said during a 2020 Berkshire Hathaway annual shareholders meeting. “A few [are], maybe, but on balance, I think people are much better off buying a cross-section of America and just forgetting about it.”