Flight to substance: How Chevron, Hapag-Lloyd, and RE Royalties are weatherproofing portfolios

Chevron as a fortress in the energy storm

When it comes to financial robustness, Chevron is something of a rock in the surf. In recent years, the US energy giant has imposed an operational discipline that is second to none. As current analyses show, the group's breakeven point – the oil price at which dividends and investments are covered – is just over USD 50 per barrel. This means that even if the energy markets collapse, Chevron will still be making money while its competitors are already in the red.

For investors looking for stable returns, this is the most important metric of all. Chevron does not use its stable cash flows for expensive adventures, but consistently returns them to its shareholders. In a world where the International Energy Agency (IEA) forecasts growing supply but geopolitical conflicts are supporting prices, Chevron is the ultimate insurance policy. It is betting on the physical reality that the global economy would still grind to a halt without oil and gas.

Hapag-Lloyd as a beneficiary of the complex global situation

Hapag-Lloyd enjoys a similar status, albeit in a more cyclical environment. The long-established Hamburg-based shipping company has used the boom years of the pandemic to restructure its balance sheet and build up a war chest. The ongoing tensions in the Red Sea and the reorganization of global trade routes are playing into the hands of the major liner shipping companies, as scarcity is keeping freight rates high.

With the cooperation that Hapag-Lloyd has entered into with Maersk under the code name "Gemini," the Company is cementing its claim to operational excellence.
Although profits in shipping fluctuate more than in the energy sector, Hapag-Lloyd has proven that it can pay generous dividends even in rough seas. For investors, the stock is a bet that global trade in goods will continue to grow despite all the doom and gloom, and that capacity will remain tight.

RE Royalties: Profiting from the energy transition

While Chevron and Hapag-Lloyd represent the old economy, RE Royalties brings a breath of fresh air to the portfolio – with a business model that combines the security of infrastructure with the returns of private equity. The Canadian company finances renewable energy projects in the areas of wind, solar, and storage. To do this, the Company does not rely on loans, but on so-called royalties. The principle is ingeniously simple: RE Royalties provides project developers with capital and, in return, receives a fixed percentage of gross revenue – before operating costs are deducted.

This model eliminates the typical operator risk for RE Royalties. If a gearbox breaks down at a wind farm or maintenance costs rise, that is the operator's problem, not RE Royalties'. The revenue flows as long as the electricity flows. **The Company thus closes a critical gap in the market, as banks are often too inflexible for medium-sized projects. Operators of wind and solar farms are therefore often dependent on the support of players such as RE Royalties. The key figures speak for themselves. The portfolio is now broadly diversified across various technologies and jurisdictions in North America and Europe, which minimizes cluster risks. For dividend hunters, RE Royalties is an exciting hybrid: you get the stable distributions that are otherwise only offered by utilities, but at the same time have the growth potential of a specialized financier. The stock currently offers a dividend yield of around 12%.

Conclusion: Stability through diversification

Those who want to protect their portfolio against a tech crash need assets that generate real returns. Chevron provides the basic supply, Hapag-Lloyd the logistical leverage, and RE Royalties the smart and significantly greener returns. As a small-cap, the stock is more volatile than an oil multinational and therefore more suited to speculative investors, but the model of secure income streams is a strong argument, especially in uncertain times. The market is increasingly seeing it this way, too – the stock has been rising again for some time.