Why did Chevron, the oil giant, become one of Warren Buffett's top five holdings?

Today, let’s continue to look at the U.S. energy sector. Last time, we discussed the largest U.S. oil company—ExxonMobil. This time, let’s take a look at the second-largest, Chevron, just behind ExxonMobil.

Last time we talked about ExxonMobil, oil prices were at their peak, so U.S. stocks also hit new highs. Currently, as oil prices have retreated, they’ve fallen by 15%, but are still at high levels. Not a big issue. If a war breaks out next time and the Strait of Hormuz is closed, you might consider this oil leader, as its gains will significantly outperform oil itself.

Next, let’s continue to examine Chevron, the second major U.S. oil company.

1. Introduction

Chevron Corporation (NYSE: CVX) is a leading global integrated energy giant, headquartered in San Ramon, California. Its market capitalization is about $368 billion (current stock price around $184.78). The company’s business covers upstream (oil and gas exploration and production), downstream (refining, marketing, and transportation), as well as chemicals, and it also manufactures fuel vehicles.

Chevron was originally called Standard Oil of California (Socal), which resulted from the 1911 breakup of Standard Oil due to antitrust laws. Chevron is one of the world’s six major oil companies and the second-largest integrated energy company in the U.S. (after ExxonMobil).

2. Business Moat

2.1 Resource Advantages

Chevron controls high-quality global oil and gas assets:

• Permian Basin (core U.S. shale region)

• Gulf of Mexico (deepwater oil fields)

• Tengiz oil field in Kazakhstan (super oil field)

Features of these assets:

• Low extraction costs

• Long lifecycle

• Strong resilience to oil price fluctuations

2.2 Cost Control Ability (Top in the Industry)

In the oil industry: survival depends not on how much you earn, but whether you can withstand the cycle.

Chevron’s characteristics:

• Shale oil cost: about $30-$40 /barrel

• Lower global average costs compared to peers

• Very disciplined CAPEX (no reckless expansion), meaning very strong capital expenditure control—spending when necessary, not spending when it’s not.

2.3 Cash Flow Machine + Shareholder Returns

Chevron’s biggest label is: “Cash Cow Company.” Its stock has long-term high dividends (dividend yield around 3%-5%), continuous buybacks (about $12 billion repurchased in the past 12 months, very aggressive), and low debt.

Therefore, this type of company is very popular with Buffett, who started building a position in 2020. He has already bought 160 million shares, making it one of his top five holdings.

3. Financial Data

Currently, the market cap is $368 billion, with a P/E ratio of 27.8x. Compared to XOM (ExxonMobil), which has a P/E of 24x, it’s slightly higher. Its U.S. stock returns are about 6.67%, similar to XOM, but XOM’s stock price is cheaper than CVX.

The company’s annual revenue is very stable, around $190 billion for the past three years. Net income has been declining since 2022, from $35 billion in 2022 down to $12 billion in 2025.

Previously, we looked at the revenue and income of the Seven Sisters. The MAG7’s revenue has almost been growing, and companies like Nvidia have doubled their revenue. Tech stocks also have very high net profit margins, showing how “terrifying” tech stocks can be! So, currently, a limited allocation to tech stocks is recommended.

Of course, this doesn’t mean traditional energy companies are bad. If you look at the stock price, CVX’s monthly chart performance is almost the same as the market. From the low point of $50 in 2020 to now, it has tripled, which is somewhat opposite to the cycle of tech stocks.

In terms of revenue structure, most revenue still comes from upstream, i.e., selling energy, accounting for about 75% of total revenue.

In conclusion, I think oil prices are still high, and both Chevron’s first and second oil leaders are already at high stock prices. In the short term, it’s not suitable to buy. Once oil prices drop to lower levels, you can consider appropriate positioning.