The US 10-Year topped 5% yesterday, and the major indices were all down just like clockwork at first. While that was an attention grabber, it was also a powerful reminder to stay focused: 17% of S&P 500 companies have reported as of last Friday, with 73% reporting positive EPS (earnings per share) and 66% reporting positive revenues, notes Keith Fitz-Gerald, editor of 5 with Fitz.
We’ve seen this script before. The headlines will make you think the end of the financial universe is upon us because of China, Russia, the Middle East, politics…whatever. Yet, profits are always the currency of success.
As for interest rates, how much of your money are you putting into T-bills now that rates have topped 5%? The venerable Stuart Varney wanted to know and my answer was “My excess cash.”
Many people think about safety and, no doubt, that’s important—but the real key is making sure that your money is available for any pullback or bargain hunting. Earnings of 5%+ while you go shopping strikes me as a dang good deal!
Meanwhile, I suggested recently that ExxonMobil’s (XOM) Pioneer Natural (PXD) merger would be the first of many moves in this space as the bigger, more powerful players go on a shopping spree.
No sooner said than done. Chevron (CVX) agreed to buy Hess (HES) in an all-stock transaction valued at $53B or $171 per share, based on Chevron’s closing price as of October 20. It’s a super-smart move, and the timing is perfect.
The purchase diversifies Chevron’s portfolio while also giving it access to the Stabroek Block in Guyana and the US/Canadian Bakken assets, which further plays to domestic energy security. There are Permian assets, too.
I expect the purchase to generate significant free cash flow for the foreseeable future. That’s great for the dividend and the true shareholder yield, which was recently about 10.1% versus the listed 3.65% most investors will see on their favorite public investing websites. You know what to do, or at least I hope you do.
Some parting thoughts: Many people find themselves glued to their iPhones, computers, tablets…whatever…right now. And I get why they feel that way.
Respectfully, think about this for a second.
Wall Street has spent billions learning to push your buttons while rigging the game at the expense of anybody who gets caught up in the short-term lottery mentality that is so pervasive right now.
The real flex is being able to walk away from your screens. Just sayin’.
