Chevron and Other Commodity Stocks Are Cheap. Time to Buy Soon.

The equity price declines have come as the commodity prices have fallen, with West Texas Intermediate crude, the U.S. benchmark, down more than 40% from a multiyear peak last year. Copper is down more than 20% from its peak last year.

Those highs were hit during a surge in post-lockdown economic demand, but inflation spurred central banks around the globe to lift interest rates last year—and U.S. economic growth has been declining. Now these stocks are cheap.

The energy fund’s aggregate forward price/earnings multiple is down to just below 10 times, according to FactSet, from around 13 times at one point in 2022. The metals miner fund’s earnings multiple is down to about 8.5 times from around 11 times a few months ago.

The funds trade a bit above their lowest multiples in the past five years. But their still-lower valuations mean the market is discounting both the possibility of a recession and analyst expectations that sales and earnings per share will be down year over year for 2023. 

The Federal Reserve is expected to pause on lifting interest rates this month—or soon this year—which would allow economic demand to bottom. That could eventually boost the price of oil and copper and, in turn, the stocks.

Already, the price of oil is holding the line at a key level. WTI crude, at about $70 a barrel, continues to find enough buyers to keep it above the low- to mid-60s area, where those buyers have stepped in consistently to prop up the price since late 2021.

And the price of copper, at about $3.71 per unit, is getting buying support at above the $3.30 level, where it has held above since last summer.

“We’re nearing the end of a global economic slowdown and you want to buy these [stocks] when you think the other side is coming close by,” says Keith Lerner, co-chief investment officer at

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“You want to see the earnings trends actually start to turn up.” 

For the moment, oil analysts expect a stabilization in sales and profits next year. Analyst’s aggregate EPS forecast for companies in the energy fund is $7.87 this year, down from $10.38 last year. But the drop should moderate next year to $7.83, down not even 1%.

For copper, analysts expect EPS for the mining fund to drop to $5.45 this year from $7.08 last year. They see a more mild drop to $4.98 next year and a modest rebound to $5.25 in 2025. 

Not only could investors enjoy stock price gains, but they will receive some extra return through dividends, too. Right now, per share dividends for the energy fund yield almost 4% to the current share price of the fund, a yield that analysts expect to increase over the next few years as profits eventually rise.

For the mining fund, this year’s dividend yield is only just over 2%. But dividend payments are expected to rise with earnings growth, and they would also get an extra boost if profit forecasts increase, too. 

These stocks are looking increasingly like buys. Any further drops should make investors even more interested in them. 

Write to Jacob Sonenshine at [email protected]