With interest rates soaring, investors are looking for safe stocks to invest in. Back in 1981, Warren Buffett’s advice for times like these is to look for companies that:
- Can increase their prices quickly and easily to keep up with inflation/interest rates
- Can take on new/more business without having to invest heavily
By keeping up with his company’s portfolio (Berkshire Hathaway) you can see that he’s taking his own advice. The investment firm has loaded up on energy and oil giant Chevron. While the company was already invested heavily into Chevron ($4.5b stake in 2021), the stock now represents the fourth-largest public holding ($25.9b today).
This investment makes sense – Chevron has performed incredibly well as commodity prices boom. In fact, the company boasted record-high quarterly earnings of $11.62 billion – up over $8 billion year over year. Just in 2022 alone, the stock has risen 30% – as the oil industry itself has soared 23% year-to-date. It’s safe to expect this trend to continue as the Russian invasion of Ukraine continues to put a strain on the oil industry.
Now – many investors assume that they should follow suit and invest in Chevron – along with other stocks that Berkshire Hathaway has been loading up on as we see inflation and interest rates spike. However, our system is currently not rating Chevron a buy – but rather, a hold. Here’s why…
Why the Timing isn’t Quite Right for Chevron
Make no mistake – Chevron shows promise to be a great opportunity for investors in the near future. But right now, the timing isn’t quite right. At least, not according to the VectorVest system.
Our simple, intuitive stock rating software uses a proprietary system that simplifies analysis based on relative value (RV), relative safety (RS), and relative timing (RT). Together, these make up the overall VST rating of a stock. These metrics are ranked with an easy-to-understand scale of 0.00-2.00 – the closer to 2.00, the better. And right now, Chevron is rated a hold. The primary reason for this is the RT rating falling below 1.00 to just 0.91. This tells us the stock is in a slight down trend..
That’s not to say there aren’t positive indicators for Chevron – the upside potential this stock has is tremendous. Taking into account the long-term price appreciation potential of this stock, it’s been given an RV rating of 1.67 – which is extremely good. We also believe the stock is undervalued at a current share price of $157 – we value it much higher, at around $224/share. Furthermore, the stock has a remarkable comfort index (CI) of 1.54 – which is excellent on a scale of 1.00-2.00. This suggests the company has the ability to resist severe or lengthy price declines. All this, coupled with a forecasted earnings growth rate of 40%, shows promise for the future.
However, Chevron’s poor timing – along with an RS of just 1.05 – has contributed to an overall VST of just 1.21. This is pretty good, but our system suggests holding Chevron for now. If you want to invest in Chevron, the VectorVest system suggests adding it to your watchlist and waiting for a positive trend to form and gain momentum. Once the RT crosses back over 1.00 and moves towards 2.00, the stock will likely become rated a buy. However, if a negative trend gains wind and starts moving the RT closer to 0.00, the stock will likely become a sell. Keep up to date and be the first to know what the right move is!
Want These Types of Insights at Your Fingertips so You Can Win More Trades?
Use VectorVest to Analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.
VectorVest advocates buying safe, undervalued stocks, rising in price. As for Chevron, it has incredible upside potential, it is fairly safe, but the timing isn’t quite right.
Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!