We add to our Chevron position on weakness

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Gas prices of around $ 5.00 per gallon are posted at Valero and Chevron stations on October 12, 2021 in Mill Valley, California.

Justin Sullivan | Getty Images

(This article was first sent to CNBC Investing Club members with Jim Cramer. To get real-time updates delivered to your inbox, subscribe here.)

After receiving this email, we will purchase 150 shares of Chevron (CVX) to approximately $ 111.79. Following the transaction, the Charitable Trust will own 700 Chevron shares. This purchase will increase the weight of CVX in the portfolio from approximately 1.53% to 1.94%.

Markets are expected to open lower on Monday, mainly due to concerns over the rapid spread of the omicron variant and its potential impact on the economic recovery.

In addition to COVID-19 uncertainties, Goldman Sachs lowered its GDP forecast for 2022 after learning Sunday that Democratic Senator Joe Manchin would not support the Biden administration’s “Build Back Better” plan.

Due to these negative developments over the weekend, investors are taking a very cautious approach this morning. Stocks are down, the 10-year US Treasury yield is slightly lower, and the price of WTI oil has dropped back below $ 70.

There can be a lot of negativity in the market today with lower prices across the board, but we’re going to be doing a bit of buying as we have a lot of money in store and we never like to hesitate to make a good discount. That being said, we want to be picky and selective with our buying at this time as we still see the need to protect liquidity as the market is not yet oversold based on the most recent short oscillator reading. S&P scope. We plan to make more money work as prices fall and the market becomes oversold.

Chevron is an idea we wrote about last Friday, and with our trade restrictions lifted on Monday, we’re free to pick certain stocks and deepen our position.

Starting with the dividend, we find the current yield of around 4.80% (based on the price at the time of this writing) very attractive in the current environment and is quite safe due to the prowess of Chevron cash flow generation. Even at $ 60 a barrel, Chevron believes it can generate $ 25 billion in excess cash over the next five years, which means what’s left over after funding its capital spending program and paying the dividend. Chevron can achieve this because their operating costs are going down, production is going up, and they have become much more capital efficient. Chevron is a better company today than it was just a few years ago.

While the dividend is great and offers some degree of support and defense in times of market stress, there is also a story of share buybacks building up here. Management recently raised its share buyback target to $ 3 billion to $ 5 billion in shares per year, up from its previous target of $ 2 billion to $ 3 billion. We believe there is still room for this target if oil prices stay at current levels or increase.

From an ESG perspective, we like the role Chevron is playing in the energy transition. To accelerate the growth of its low-carbon business, the company announced in September that it would triple its planned total capital investment to $ 10 billion by 2028, including $ 2 billion to reduce the carbon intensity of its operations. .

The CNBC Investing Club is now the official headquarters of my charity. This is the place where you can see every move we make for the portfolio and get my market snapshot before anyone else. The Charitable Trust and my writings are no longer affiliated with Action Alerts Plus in any way.

As a CNBC Investing Club Subscriber with Jim Cramer, you will receive a Trade Alert before Jim completes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling any stock in his charitable trust portfolio. If Jim has mentioned a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. See here for investment disclaimer.

(Jim Cramer’s charitable trust is CLC long.)


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