CVX trading at $60 during the pandemic was unreasonable, but it is also irrational to pay more that $100 a share given Chevron’s annual gross profits. As the economy slows I expect Chevron to drop to a more reasonable valuation (maybe $70-90 per share). Just normal market fluctuations, not a panic. What is frustrating in seeing Sr. management try to reverse this slide with huge stock buybacks, lining their pockets with a short-term bump to gin up their compensation metrics instead of investing in long-term value creation. Why exactly does Chevron have a board of directors if not to focus on long-term health of the company? Watch for a late 2rd quarter sell off by Berkshire Hathaway (liquidation of 50% of their CVX holdings) to signal the beginning of the downward adjustment, and expect layoff talk by Q4 (because that’s the only tool in Chevron’s management pea brains).
17 replies (most recent on top)
Don’t say I did not warn you! “Berkshire Hathaway has sold billions of dollars' worth of U.S. stocks in the first three months of the year, raising concerns among investors over the state of the slowing U.S. economy”.
RM exercise mind control over OPEC and stock market. Voodoo. Made prices go up yesterday. Be careful bruh.
This aged well…
Chevron, like all oil companies, has its stock price dictated by market conditions, not by its "superlative" management or "outstanding performance" (both in quotes because neither is true). If there's a global recession on the horizon, demand (and therefore stock price) will fall. Just plot Chevron/Gulf/Texaco stock price against prevailing market conditions for the last 40 years, and you will see this to be true. Nothing that our "stellar management" or "world class scientists and engineers" can do about that. For the youngsters here, just look at 2020, when Covid froze the market while we were undergoing our "best in class" transformation. For those a little older, go back to 2015 or 2008 (or 2002, or 1999, etc. etc.). Management insight or technical savvy hold little sway over stock price. Since we have neither of those (especially now), we're just going along for the Wall St. ride.
When will chevron buy oxy?
I hope everyone sold quite some time ago. I think 1H2022 nearly everyone liquidated their holdings, as indicated by filings. Why hold CVX stock when it was soaring way above highs not seen in decades?
“Buying back shares when they are cheap is a very solid plan”… except right now they are not cheap! There is no justification for buyback other than Sr. Management does not have any ideas what to invest in and they want the juice the metric that determines their cash out. Under current conditions it is a total losers game and Wall Street is starting to notice. I am not going to short Chevron (it is not that bad) but I am gradually selling.
Given the company does not have a viable growth strategy in this hostile anti-oil climate and is not replacing reserves, CVX stock does not look cheap to me, IMHO. Unless I am missing something, the company appears to be in liquidation mode. Please tell me I am wrong.
Stock buy-backs signal to Wall St. that you have no good projects to invest in (in other words, no upside potential). That is undeniable. What is also undeniable is who benefits directly from stock buy-backs. Yes, the "shareholders". Especially those holding millions of shares and oodles of stock options. In other words, upper management.
Just give me $1.35 gasoline again.
Buying back shares when they are cheap is a very solid plan, actually. The additional shares are frequently used in acquisitions. Do your homework!
Crude oil is back below $70 and the recession is just getting started. Buying back shares at his point seems to be a loosing proposition. Generally a company buys back shares when it has no other decent investment options. Does not say much for the CVX investment portfolio. Where is the future growth for the company or is it destined to be another merger candidate in the ongoing industry consolidation?
Stock buybacks do not give the “company more shares to use in an acquisition”. They are equivalent to just giving the money back to investors: “Here take this money back as we don’t know how to spend it productively”. Similar to just paying higher dividends, except it gins up a better bonus of the big fish who are compensated based on the stock price. What it does not do is position the company for greater profits in future.
I am shorting my pension and 401K shares to double my money. RM loves the stock buyback so I am opposing her random and crazy impulse. I read about it on Reddit and am dyatrrading REobinhood while pretending to work. Bank stock meltdown nothing compared to this.
The stock buybacks are the only place they can find to put the money. We have zero debt and plenty of cash. Dividend is funded, so buybacks are the only answer. They don’t do so much for the share price, really. They give the company more shares to use in an acquisition which will occur when prices fall. Exploration has failed to bring forward any meaningful proposals or results so their budget remains severely constrained. Same goes for new energies unless they come up with high return projects. We have money but nowhere to turn.
Good shout. Have you sold all your shares then? You can also short the stock, you’ll be a billionaire
Lol, ok