Buffett - CVX -- May 1, 2022

Berkshire / Buffett

Tracked here.

Updates

May 7, 2022: Buffett's unrealized gains in five days.

May 3, 2022: why Buffett bought Chevron. 

May 2, 2022: CNBC -- Buffett bought more Apple during 1Q22; would have added more if the stock had not rebounded (LOL --sounds like a day trader, not an investor).

• $600 million additional shares during a three-day decline
• current value: $159.1 billion
• now about 40% of his equity portfolio

Unless there was a typo, CNBC says Warren / BKR's equity portfolio is now 40% AAPL.

Prior to the purchase, AAPL was 47% of his equity portfolio according to other sources.

If the numbers are accurate, then the $25 billion (or whatever it was) purchase of Chevron and increase in energy prices overall and the significant drop in price of AAPL shares, the 47% to 40% change is incredibly noteworthy.

Buffett said he would have bought more had the price not rebounded (it has since dropped again) Buffett  sounded like a day trader rather than an investor). I thought that answer -- why he didn't buy more AAPL was glib -- and not worthy of Buffett.

My hunch is he saw the returns that CVX was guaranteeing him (blue chip dividend payer) compared to the one-penny increase in Apple's dividend.

May 2, 2022: Barron's -- Buffett bought CVX for the dividend. 

May 2, 2022: Barron's -- total earnings (BRK) were lower than operating profit in 1Q22 because of paper declines in Berkshire's big equity portfolio in a weaker stock market. Link here.

Original Post 

If we don't see a half-dozen or more articles on Seeking Alpha with regard to Buffett and CVX, it will speak volumes. This is probably the biggest story for the first quarter of 2022, including the meltdown / implosion of tech stocks. 

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them. 

This morning: it's going to be all about Warren Buffett and Chevron.

We will start with re-posting a bit from last night, and then move on to several links. Probably just the links for now, and no comments. Just too much to absorb.

First, re-posting: 

Berkshire Hathaway increased its holdings of Chevron in 1Q22: multiple sources. From Barron's:

But this from thestreet back in February 14, 2022:

I'll let others sort this out, but if I'm reading this correctly, someone seems to be mistaken. But again, I often misread things.

CVX was trading for about $157 on Friday, at the close, April 29, 2022.

Only two stocks were prominently mentioned at the 2022 annual meeting: Chevron and Activision.

But look at the Chevron headlines:

• Buffett's Berkshire Hathaway made big bet on energy as first-quarter operating profits edged higher -- Barron's
• Warren Buffett is betting more on Chevron -- Bloomberg
• Warren Buffett significantly increases Chevron bet, now in Berkshire's top four positions -- CNBC

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The Links

One of my best posts ever with regard to investing and the energy sector was about Devon, posted in August, 2021. This post won't be as good but hopefully it will be as prescient. 

Buffett and Munger know more about fossil fuel energy than anyone in the business.

The big question: what did Buffett see?  

The links:

• CVX, earnings call transcript, 1Q22, link here. 
• CVX, earnings per share, 2010 - 2021, link here. 
• CVX has best quarter since 2014, that was the last quarter of 2021, not the most recent quarteer, New York Times, January 28, 2021, link here. 
• 1Q22 results, freee cash flow, press release, link here.
• Compare EPS with others, Macrotrends, link here.

CVX, earnings per share, 2010 - 2021:
 

Comments:

• the last bar is for 1Q22, just reported, not yet on the macrotrends chart; it is approximate: $3.36, adjusted, per share;
• at $3.36, the 1Q22 EPS exceeded all but four previous quarters since 4Q09. forty-nine quarters
• losses in those 49 quarters were trivial, except for:
• 4Q19: shale write-offs in Argentina;
• 2Q20: first three months of global lock down (Covid-19)
  
• imagine if we are at the beginning of a super-cycle in crude oil;

Other data points:

• crude oil selling price:
• crude oil selling price, CVX, 4Q21:
• crude oil selling price, CVX, 1Q22:
• production guidance,  CVX:
  
• reports that CVX could increase production by 35% in CY22; need to fact check; clearly CVX will increase production significantly in CY22
• Chevron will produce the equivalent of about 725,000 barrels of oil daily in the Permian Basin this year, a 15% increase from 2021, the company said in an investor presentation on Friday. That’s up from the previous plan for a 10% increase in the region. Rigzone link here.
  
• issues with CPC seem to have been resolved
• inflation
• to drill, inflationary costs are high in the US
• to drill inflationay costs are flat in the reest of the world
• capex:
• 20% of CVX capex, stateside
• 80% of CVX capex, overseas
• dividends
• Buffett doesn't like paying dividends
• Buffett loves receiving dividends
• yield at time of purchase the yield was well above market average
• recent dividend hikes more frequent than annual

Energy transition:

• see the last bullet by Buffett in the very first "graphic" above;
• this was like a light going on
• the Peter Zeihan theme
  

And we haven't even gotten to current geopolitical events, the two most relevant being:

• EU will agree to ban all Russian energy by end of this year:
• Russian oil sector will falter when lack of western technology impacts the drilling

OXY: one wonders how much "inside information" (knowledge, understanding, "buzz") with his relationship with OXY's CEO. 

Later, some data regarding the Berkshire Hathaway portfolio.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them. 

Berkshire Hathaway holdings: we will get an update later this month for 2Q22. This is Berkshire's information for 1Q22, updated March 24, 2022, before the annual meeting yesterday, April 30, 2022. BRK's top holdings:

• AAPL:
• 47.6% of BRK's portfolio; $157.5 billion
• one billion shares
• pays 0.56% 
• from above, May 2, 2022
• $600 million additional shares during a three-day decline
  current value: $159.1 billion
  now about 40% of his equity portfolio
• BofA:
• 13.6% of BRK's portfolio; $45 billion
• one billion shares;
• pays 2.35%
  
• AMEX:
• 7.5% of BRK's portfolio; $24.8 billion
• 151.6 million shares
• pays 1.19%
  
• KO:
• 72% of BRK's portfolio; $23.7 billion
• 400 million shares;
• pays 2.72%
  
• Kraft Heinz
• 3.5& of BRK's portfolio; $11.7 billion
• 325.6 million shares
• pays 3.75%
  

Now, in 2Q22:

• CVX:
• $25.9 billion
• 160 million shares
• pays 3.63%
  
• if accurate, would make CVX BRK's third largest holding, dropping KO to fifth, and Kraft Heinz out of the top five.