A business exists to serve the needs and wants of its customers. A successful business will often look for ways to expand into more goods and services that customers demand.
But mistakes can be made. And ideas that sound great may not lead to additional profits. A great company will periodically evaluate its actions and get rid of unprofitable business lines to better focus on its profit centers.
For instance, energy giant Chevron (CVX), recently closed two clean fuel plants. These plants made fuel out of products such as soybeans and corn, but government regulations have made that business unprofitable.
That means that Chevron will focus more on its core business of oil and gas instead.
The energy market hasn’t been the top place to invest in the past year, and Chevron remains down 8 percent, even with earnings dropping 64 percent.
However, shares are going for 12 times earnings, a hefty discount to the overall market.
Action to take: With shares near a 52-week low, Chevron looks like a long-term buy now. Oil is perking closer to the $80 range.
Plus, Chevron pays a 4.4 percent dividend at current prices. Chevron has a history of raising its payout over time, another favorable factor for long-term investors now.
For traders, Chevron looks oversold in the short term and could trend higher in the next few months. The June $165 calls, last trading for about $2.50, could see mid-double-digit returns on a rebound in Chevron.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.