Up 50% in this bear market, is Chevron still the winner?


what happened

Most stocks have fallen in the past year. The S&P 500 It hit its 2022 peak on January 3 and plunged into a brutal bear market, ending the year down 20%.

Chevron (CVX 1.13%) Stocks, however, went in the opposite direction. The oil giant’s shares have risen 50.5% since the market peak through the end of the year, according to data provided by S&P Global Market Intelligence. While higher oil prices helped fuel that rally, it wasn’t Chevron’s only catalyst. Check it out here Oil stocks Has the potential to continue producing winning returns in 2023.

so what

Chevron has feasted on high oil and gas prices in the past year. The energy giant posted a record profit of $11.6 billion in the second quarter. It followed with its second-best earnings in the third quarter, at $11.2 billion. The company also posted record operating cash flow of $15.3 billion in the third quarter.

Chevron allocated its windfall across its four financial priorities:

  • It increased 6%, marking the 35th consecutive year of dividend increases.
  • The energy company has invested in growing its traditional and new energy businesses, including the acquisition of Renewable Energy Group to become the country’s second largest biorenewable diesel producer.
  • It has paid down debt, its net debt ratio is below 5%, below the target range of 20% to 25%.
  • Chevron repurchased shares at the high end of its guidance range.

Another major catalyst fueling Chevron’s rally last year was Warren Buffett. his company, Berkshire Hathaway, bought a boatload of Chevron stock. Berkshire owns 169.7 million shares, or 8.8% of Chevron’s outstanding stock. The position is valued at about $30 billion, representing 9.1% of Berkshire’s portfolio and its third-largest holding. Berkshire’s heavy buying of Chevron likely led other investors to add oil stocks to their portfolios.

what now

Chevron expects oil prices to remain strong in 2023. The company’s CEO, Michael Wirth, said he believes supply will remain constrained due to policy issues, Russia’s invasion of Ukraine, low industry investment and OPEC. This leads him to think that the risk is leaning to the upside of oil prices. Many others in the industry agree More reverse catalysts for oil Price than downward pressure.

That scene is leading to Chevron Increase its capital investment by 25% this year. A big driver is the continued ramp up in its low carbon investments. This positions the company for future growth and allows it to capitalize on higher oil prices. Because of that, oil stocks could keep winning.

Matthew DiLallo holds positions at Berkshire Hathaway. The Motley Fool features and recommends Berkshire Hathaway. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway, short January 2023 $200 calls on Berkshire Hathaway and short January 2023 $265 calls on Berkshire Hathaway. Motley Fool has a revealing policy.


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