The Motley Foolยท2025-10-19 23:50Core Viewpoint - Warren Buffett's Berkshire Hathaway has significantly increased its investment in Chevron, purchasing nearly 3.5 million shares worth approximately $520 million, marking a notable shift in strategy after being a net seller in recent quarters [4][10]. Company Summary - Chevron has been a favored stock of Buffett since 2020, with Berkshire Hathaway initially acquiring shares at around $80. The position has seen aggressive management, including a 50% reduction in early 2021 and a substantial acquisition of 121 million shares in 2022 [3][4]. - Currently, Chevron trades at a price-to-earnings ratio of 19, which is lower than the S&P 500's 31, making it appear attractive in a market that lacks obvious value [6][9]. - The company maintains a strong free cash flow, supporting a dividend yield of 4.5%, despite stagnant revenue growth [6][9]. Industry Summary - The oil industry faces challenges, including a significant drop in oil prices, which have fallen below $60 per barrel, and rising inventories expected to lead to surpluses by 2026 [7][8]. - Chevron's integrated business model, which includes refining and chemical production, allows it to manage industry cyclicality effectively. The CEO emphasizes cost controls and capital efficiency to stabilize profits amid low oil prices [8]. - Despite current challenges, Chevron remains a compelling investment for those seeking value in a potentially bearish market, with its dividend yield and consistent free cash flow providing a buffer against downturns [9][10].