Industry-leading companies have several advantages that make them worth owning, even if they are more expensive than smaller competitors. For Chevron (NYSE: CVX) and Caterpillar (NYSE: CAT) , those advantages were put on display in 2020 when deep pockets allowed both companies to make timely acquisitions during a depressed oil and gas market.
In 2020, the average price of West Texas Intermediate (WTI) crude oil, the U.S. benchmark, was under $40 per barrel, and the average Henry Hub natural gas price was just under $2 per MMBtu. Today, WTI is over $90 per barrel. Natural gas is over $4.30 per MMBtu and got as high as $5.50 per MMBtu in October 2021. These are the highest oil and natural gas prices since 2014.
Here's a look at how each company's acquisition plays into its broader investment thesis.
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$90 Oil: Chevron and Caterpillar's 2020 Acquisitions Are Paying Off Big Time