For decades, everyday investors have looked to Wall Street's smartest and most successful investors for inspiration and ideas about where they should spend their own money. Thanks to Form 13F filings Thanks to the Securities and Exchange Commission, investors can look over the proverbial shoulders of Wall Street greats like billionaires Warren Buffett, Ken Griffin, Ken Fisher and Steven Cohen to see what they've been up to.
A 13F is a required quarterly filing by institutional investors and money managers with at least $100 million in assets under management. It provides a snapshot of what Wall Street's top investors bought, sold and held in the most recent quarter.
Affectionately nicknamed the “Oracle of Omaha,” Buffett oversees a $364 billion investment portfolio that includes 45 stocks and two index funds. Berkshire Hathaway, while Ken Griffin's Citadel, the most profitable of all hedge funds since inception, has $58 billion in assets under management. According to 13F aggregator WhaleWisdom.com, Ken Fisher's Fisher Asset Management and Steven Cohen's Point72 Asset Management had $189 billion and $41 billion in assets under management, respectively, as of Dec. 31.
Although these four billionaires have different investment strategies, they all have one thing in common: the desire to continue buying shares of one leading company.
Meet the Stocks Warren Buffett, Ken Griffin, Ken Fisher and Steven Cohen can't stop buying
Based on the 13Fs filed for the quarter ended December, the top company that the Oracle of Omaha, Ken Griffin, Ken Fisher and Steven Cohen purposely added to their respective portfolios is: energy titanium Chevron (NYSE:CVX).
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Warren Buffett's Berkshire Hathaway bought 15,845,037 shares.
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Ken Griffin's Citadel Advisors bought 1,555,345 shares.
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Ken Fisher's Fisher Asset Management added 593,585 shares.
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Steven Cohen's Point72 Asset Management grabbed 139,084 shares.
The most logical reason these prominent billionaire investors have piled into Chevron stock is the expectation that crude oil prices will remain high. During the COVID-19 pandemic, global energy giants, including Chevron, were forced to cut capital expenditure (capex) for three years due to historic demand uncertainty. Although the worst of the pandemic is long behind us and energy companies have increased investment, global crude oil supply remains tight.
In addition, the Russian invasion of Ukraine has created supply uncertainties for Europe. As long as the supply of crude oil is limited, there is a good chance that the price per barrel will rise above historical norms.
Although Chevron is an integrated energy company, it generates the lion's share of its profits from its upstream operations (i.e. drilling operations). If spot crude oil prices remain above historical norms, Chevron is likely to generate substantial operating cash flow.
Chevron's production is expanding, but the company is well hedged if oil prices fall
Another reason why billionaires are undeniably bullish on Chevron is its production profile. In 2023, Chevron achieved record production of 3.1 million barrels of oil equivalent per day and expects production to increase 4% to 7% this year.
While some of this increase is organic and will be driven by production improvements in the oil-rich Permian Basin, Chevron is no stranger to inorganic growth. In October it announced an all-stock deal for the acquisition Hess (NYSE: HES) for what was then valued at $53 billion: 1.025 shares of Chevron for every share of Hess. Assuming this deal closes in 2024 as expected, it will add significant oil equivalent production in Guyana, as well as 465,000 hectares in the Bakken Shale, located in North Dakota.
Something else Chevron brings to the table is its integrated midstream and downstream assets. It owns and oversees a network of transportation pipelines, along with refineries and chemical plants – its 'downstream' assets.
Most pipelines operate under long-term, fixed-fee contracts with drilling companies, meaning they produce highly predictable, transparent cash flow no matter how volatile the spot price for crude oil or natural gas is.
Meanwhile, chemical plants and refineries benefit when the spot price of crude oil falls. Weaker crude oil prices lower input costs for refineries and chemical plants, and tend to increase consumer demand for gas at the pump. Pardon the pun, but Chevron has perfectly combined its various operating segments to ensure that it generates plenty of cash flow in virtually any economic climate.
Chevron is every fundamentally focused investor's best friend
But it's not just Chevron's tight global oil supply and production and business profile that has billionaires swooning over its shares. The company's balance sheet, phenomenal capital return program and valuation also play a key role.
A significant increase in the spot price of crude oil in recent years has allowed Chevron to make significant progress in paying down its outstanding debt. When the curtain fell on 2023, the company had a net debt ratio of just 7.3%, which is lower than ExxonMobil, ShellAnd BP, to name just a few global energy giants. Chevron has superior financial flexibility when it comes to undertaking new projects and making additional acquisitions.
Major oil companies are also known for their juicy capital return programs, and Chevron does not disappoint. The company's board of directors approved a $75 billion stock buyback program last year and gave the green light in February to an 8% increase in its quarterly dividend. Chevron has increased its annual base payout over the past 37 years and is on track to return more than $12 billion in dividend income to its shareholders this year. The return of 4.1% on the stock offering is almost three times higher than the return on the S&P500.
Finally, the valuation makes a lot of sense for fundamentally-oriented investors like billionaire Warren Buffett. Opportunistic value seekers can buy shares of Chevron for 11.7 times Wall Street's 2025 consensus estimate. For context, that represents a 19% discount to average earnings over the past five years.
If the Oracle of Omaha, Ken Griffin, Ken Fisher and Steven Cohen are right, Chevron could be a sight to behold for patient investors.
Should You Invest $1,000 in Chevron Now?
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Sean Williams has positions in ExxonMobil. The Motley Fool holds positions in and recommends BP, Berkshire Hathaway, and Chevron. The Motley Fool has one disclosure policy.
Meet the leading stock billionaires Warren Buffett, Ken Griffin, Ken Fisher and Steven Cohen can't stop buying was originally published by The Motley Fool
