Another week and another sale. I cant remember when I had back-to-back sales in my portfolio. Like I’ve mentioned in the past, I normally do not like to sell and prefer holding shares forever. But sometimes you just have to face the reality and pull the trigger on some companies.
Yesterday, I decided to sell and close our position in Chevron Corp (CVX). Chevron is still one of the largest oil & gas companies in the world and own immense assets across the world. But as oil prices have collapsed and have stayed depressed for almost two years now, the low prices have resulted in the company taking some eyebrow-raising moves. First, Chevron resorted to cutting its buyback program (I’ve always remained critical of stock buybacks. Companies, no different than retail traders driven by emotion, buy when stock is expensive and terminate such programs when the stock is cheap) and more recently has resorted all sorts of financial engineering to prop up its books.
More importantly, the company has resorted to selling quality assets across the world. Chevron is an integrated oil company with both upstream and downstream projects — and what surprises me is that they are selling more of their downstream business segments (which are more profitable in a depressed oil market) while hanging onto more upstream projects (they are also selling some upstream projects as well btw). Chevron is turning into more of a exploration & production (E&P) company, which is something that I am not interested in owning. The business is changing significantly on a weekly basis as the fire sales are completed in order to generate some cash to pay dividends to shareholders.
I think the dividends are still safe for now. I reviewed their dividends safety recently in this article. But the combination of debt load, upcoming debt payments, state of balance sheet and income statements and the fact that they are liquidating good quality assets all in the name of paying dividends is something that I do not care to own as an investor.
Another factor has been the changing landscape of the energy sector.
With Chevron, I see increased risk with little reward in owning this stock and have decided to quit our position. My overall profit/loss has been negligible considering the dividends payments over the past few years of owning this stock, so atleast I didnt lose money 🙂
What are your thoughts on this sale? Do you agree or disagree? Share your thoughts below.
Update: Bryan from Income Surfer posted this article on Seeking Alpha last night, which highlights all the aspects of Chevron that has driven me away from this company. Be sure to check it out.