It is time to buy Chevron

The market has been in a roaring bull run for 6 years without any significant interruptions. In this kind of super bull market, it is very difficult to find good quality stocks with good valuation for long term investment. It is very frustrating for value investors at the moment to try to find value stocks. But from time to time, you may still find some gems in the bull market. Chevron (CVX) is one of them. You may question, how could an oil company be a good one to buy when the crude oil is in a deep bearish market? Well, there are 2 parts for that. First, you won’t find good value stocks when everything is great. The best time to find them is when there is panic or depression and no one is interested in them. The oil sector is in this kind of mode and it is the dream coming true time for value investors if they want to find something with great values. Now comes to the 2^nd part which is more critical: if the company is great, then it is a perfect situation when its stock price is low. So the key is whether the company is good for long term investment. CVX is definitely one that you can say that.

While people may think Chevron is an oil exploration and production company, it is only half right. Actually CVX is involved in all aspects related to the oil business including the exploration, development, and production of crude oil and natural gas, as well as refining crude oil into petroleum products and manufacturing and marketing commodity petrochemicals and fuel and lubricant additives, and also plastics for industrial uses. That’s why it is called an integrated oil company. As an IO company, it is hurt by declining oil prices for producing the crude oil but at the same time it benefits from a low oil price for refining and manufacturing petrochemicals and related products. So it is the market stupidity to punish CVX because the oil price has crashed, which creates a great opportunity for value investors to buy CVX for long-term. CVX is one of the best run oil companies that are in a great financial shape. It is quite profitable, gushing out a lot of money. It pays good dividends for decades that you can rely on. While I’m not sure the oil price has necessarily bottomed, CVX is hitting a multi-years support around $100. Regardless what will happen for the oil prices, I doubt CVX will go down much further from this level. Right now, CVX is paying a 4%+ dividend, which is very rich. Believe or not, it has only happens 3 or 4 times for CVX in the past 20 years that its dividend yield has been over 4%. And each time this happens, its price appreciation will follow. CVX is really a great buy for now. I’m not only buying for myself for retirement but also buying for my son’s portfolio. It won’t make you rich overnight but it will allow you to sleep soundly at night and make you very rich down the road as long as you have patience to keep it for long.