With almost $200 billion in cash on its balance sheet, a fresh all-time high, Berkshire Hathaway (NYSE: BRK-B) has never looked better. But with shares trading in the stratosphere, investors looking to follow the billionaire’s strategy might like to get creative. One surefire way to do this is to identify select stocks in Buffett’s portfolio that are poised for gains and income. One Warren Buffett-owned stock with approximately 13% upside this year is Chevron Corp (NYSE: CVX).
The Oracle of Omaha has owned Chevron stock in his portfolio since 2020, and he has been increasing his stake ever since. At 126 million shares, Berkshire Hathaway’s Chevron position is now 6.80%, a chunk worth approximately $20.5 million at last check. With a forward dividend yield of 4.07%, Chevron is a major contributor to Berkshire’s annual dividend income, which reportedly hovers at a combined $6 billion.
Chevron’s stock price has a few catalysts, not least being the bullish outlook on the oil price owing to heightened geopolitical tensions and the upcoming driving season, as well as the company’s own ambitious oil and gas drilling plans.
Chevron’s Ambitious Drilling Roadmap
Chevron is actively participating in the energy transition, but it’s not a zero-sum game. According to Chevron Vice Chairman Mark Nelson, the oil major is also maintaining a “pragmatic” and “consistent” strategy in which it’s looking to strike a balance between energy security and low-carbon activities. This means more drilling for fossil fuels in addition to its efforts on the clean energy front.
As a Big Oil play, Chevron has set its sights on an offshore expansion off the coast of Australia where it intends to drill for natural gas in 2024 and 2025. The company is also poised to bolster its production in areas like the Gulf of Mexico and Bakken field where acquisition target Hess is active. Pablo Medina of energy consulting firm Welligence says deepwater projects are “back in vogue,” a forecast that stands to benefit oil majors like Chevron.
In Q1 2024, Chevron’s U.S. production increased 35% year-over-year. For the past nine consecutive quarters, Chevron has reported adjusted earnings of beyond $5 billion coupled with a return on capital employed of over 12%. For the past two years, Chevron has returned more than $5 billion in cash to investors. Given Chevron’s ability to speak Buffett’s language, it’s no wonder the billionaire is a CVX bull.
Chevron Upside
Based on Chevron’s acquisitive strategy, which includes its pending acquisition of Hess, and drilling plans, Chevron stock does not appear to be anywhere near to being done for the year.
Chevron stock is currently trading at just under $163 per share, roughly 5% from its 52-week high of $171.70 reached in Q3 2023. The stock is also within a stone’s throw of its all-time high of $178.78, which it crossed in early 2023. As a member of the Dow Jones Industrial Average, Chevron has been a driver of positive sentiment, given the stock’s 8.6% year-to-date advance, and has outperformed the index.
With an average analyst price target of $186.40, Chevron’s stock in hovering in a sweet spot in which it is poised for 13% upside, give or take. Over a dozen of those analysts rate Chevron stock a “strong buy,” including Piper Sandler, which reportedly has an “overweight” rating on the stock with a $204 price target.
If Wall Street analysts are right, this Buffett stock has plenty of more runway for gains before the year is done.
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