Stocks to Buy: Chevron (CVX)
The first is Chevron (CVX). With certain companies, and this includes Chevron and other big oil stocks, I’m not actually looking for EPS growth. Instead, I’m interested in the role CVX stock plays in the human experience.
I’m fond of saying that the world will always need energy, that our need will only increase over time, and that the energy we will need the most will be from fossil fuels. Oil is the past, the present and the future. Entire geopolitical landscapes are shaped by oil. It heats our homes; it fills our gas tanks; it’s used for plastics and polymers. You cannot escape oil. I don’t care what the environmentalists say, neither solar nor wind will ever come close to the efficiency of fossil fuels.
Chevron handles processing, transport, storage, marketing, exploration, development and production. CVX does it all. It is even involved in coal, has some insurance and real estate activities, and manages interests in power assets. CVX has $45 billion in cash against $18 billion in debt. That $27 billion in net cash translates to about $13 per share, which puts CVX stock at about 9x estimates.
CVX stock throws off anywhere between $8 billion and $15 billion in free cash flow each year. That kind of FCF makes Chevron very well-positioned for the next 30 years. The bottom line: CVX stock is a no-brainer when it comes to stocks to buy.