For decades, everyday investors have looked to Wall Street's brightest and most-successful investors for inspiration and ideas as to where they should put their own money to work. Thanks to Form 13F filings with the Securities and Exchange Commission, investors are able to peer over the proverbial shoulders of Wall Street greats like billionaires Warren Buffett, Ken Griffin, Ken Fisher, and Steven Cohen, to see what they 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.
The affably nicknamed "Oracle of Omaha," Buffett oversees a $364 billion investment portfolio containing 45 stocks and two index funds at Berkshire Hathaway, while Ken Griffin's Citadel, the most profitable of all hedge funds since inception, has $58 billion in managed assets. 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 respective assets under management, as of Dec. 31.
Though these four billionaires have differing investment strategies, they all share one thing in common: a desire to keep buying shares of one industry-leading company.
Image source: Getty Images.
Meet the stock Warren Buffett, Ken Griffin, Ken Fisher, and Steven Cohen can't stop buying
Based on 13Fs filed for the December-ended quarter, the top-tier business that the Oracle of Omaha, Ken Griffin, Ken Fisher, and Steven Cohen added with purpose to their respective portfolios is energy titanChevron(NYSE: CVX).
- Warren Buffett's Berkshire Hathaway purchased 15,845,037 shares.
- Ken Griffin's Citadel Advisors bought 1,555,345 shares.
- Ken Fisher's Fisher Asset Management added 593,585 shares.
- Steven Cohen's Point72 Asset Management picked up 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 elevated. For three years during the COVID-19 pandemic, global energy majors, including Chevron, were forced to pare back their capital expenditures (capex) because of historic demand uncertainty. Although we're well past the worst of the pandemic and energy companies have ramped up their capex, the global supply of crude oil remains tight.
To add to that, Russia's invasion of Ukraine has created supply uncertainties for Europe. As long as crude oil supply is constrained, there's a strong likelihood that its per-barrel price is going to be above historic norms.
Though Chevron is an integrated energy company, it generates the lion's share of its profit from its upstream (i.e., drilling) operations. If the spot price for crude oil remains above historic norms, there's a good chance Chevron will bring in substantial operating cash flow.
Chevron's production is expanding, but the company is well hedged if the price of oil falls
Another reason billionaires are undeniably optimistic about Chevron is its production profile. In 2023, Chevron achieved an all-time high 3.1 million barrels of oil-equivalent production per day and anticipates that its output will jump by 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 to acquire Hess(NYSE: HES) for what was then valued at $53 billion -- 1.025 shares of Chevron stock for each share of Hess. Assuming this deal closes, as expected, in 2024, it'll add significant oil-equivalent production in Guyana, as well as 465,000 acres 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 transmission pipelines, along with refineries and chemical plants -- the "downstream" assets.
Most pipelines operate under long-term, fixed-fee contracts with drilling companies, which means they produce highly predictable, transparent cash flow no matter how volatile the spot price is for crude oil or natural gas.
Meanwhile, chemical plants and refineries benefit when the spot price of crude oil declines. A weaker crude price reduces input expenses for refineries and chemical plants, and has a tendency to increase consumer demand for gas at the pump. Pardon the pun, but Chevron has perfectly blended its various operating segments to ensure that it's generating a lot of cash flow in virtually any economic climate.
Image source: Getty Images.
Chevron is a fundamentally focused investor's best friend
But it's not just tight global oil supply and Chevron's production and operating profile that have billionaires swooning over its stock. The company's balance sheet, phenomenal capital-return program, and valuation are playing key roles, too.
Thanks to a meaningful increase in the spot price of crude oil in recent years, Chevron was able to make significant headway in paying down its outstanding debt. When the curtain closed on 2023, the company had a net debt ratio of just 7.3%, which is lower than ExxonMobil, Shell, and BP, to name a few global energy majors. Chevron has superior financial flexibility when it comes undertaking new projects and making bolt-on acquisitions.
Big oil companies are also known for their juicy capital-return programs, and Chevron doesn't disappoint. The company's board authorized a $75 billion share repurchase program last year and in February green-lit an 8% increase to its quarterly dividend. Chevron has raised its base annual payout in each of the past 37 years and is on track to dole out more than $12 billion in dividend income to its shareholders this year. The 4.1% yield its shares offer is nearly triple the yield of the S&P 500.
Finally, the valuation makes a lot of sense for fundamentally focused investors, like billionaire Warren Buffett. Opportunistic value seekers can pick up shares of Chevron for 11.7 times Wall Street's consensus earnings forecast for 2025. For context, that represents a 19% discount to its average forward-year earnings multiple over the trailing-five-year period.
If the Oracle of Omaha, Ken Griffin, Ken Fisher, and Steven Cohen are right, Chevron can be a gusher for patient investors.
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Sean Williams has positions in ExxonMobil. The Motley Fool has positions in and recommends BP, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.
