Investment legend and Berkshire Hathaway CEO Warren Buffett recently revealed a massive stake in Chevron. In fact, the oil and gas gorilla is now Berkshire’s fourth-largest publicly traded holding.
Chevron is at the forefront of the energy boom. In 2021, it produced a total of over 1.8 million barrels of oil and natural gas liquids per day. Meanwhile, the company’s free cash flow has surged by more than 1,000% to $21.1 billion over the past year.
Currently, the stock trades at a price-to-cash flow ratio of 10. It also offers a healthy 3.5% dividend yield.
Occidental Petroleum is another big energy bet in Buffett’s portfolio. The Oracle of Omaha added this new position at the start of 2022. Year to date, the stock is up about 97%, so it has worked out well for the billionaire.
Occidental is the largest acreage holder in the highly coveted Permian Basin, with assets concentrated in West Texas and Southeast New Mexico. The company generates a healthy amount of free cash flow — $9.2 billion in 2021 — much of which gets handed back to investors in the form of dividends and buybacks.
OXY has already initiated a $2.5 billion buyback program to reward long-term shareholders. Currently, the stock trades at a still-cheapish price-to-cash flow of 5.
Exxon Mobil is probably the best-known oil stock in the world — for good reason. As one of the largest energy producers in the world (and biggest in the U.S.), Exxon is the definition of a blue-chip giant.
In 2021, Exxon earned $23 billion and generated a whopping $48 billion in operating cash flow. Management also recently initiated a $10 billion share repurchase program.
The stock currently trades at a price-to-free cash flow ratio of 7. Meanwhile, Exxon’s dividend yield still sits at an attractive 4.1%. Investors looking for a solid way to lock in some passive income, while hedging against white-hot inflation, should keep an eye on XOM.
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