NEW YORK (TheStreet) -- Companies like Apple
(AAPL) have mountains of money that won't help the bottom line unless put toward expanding its business. Energy companies like Chevron
(CVX - Get Report) are traditionally leaders in capital spending, as are big telecoms like Verizon
(VZ - Get Report). So where should you direct your cash?
As we enter two of the best months (historically speaking) for the S&P 500, the markets may be overdue for a break. The average S&P 500 rally in November and December during years that started with big stock market rallies is almost 6%. But, just in case the markets take a step backward before taking two steps forward, you may be well advised to focus on the capital-spending champions of the stock market.
Investors, especially during earnings season, want to see proof that companies are going to increase spending aimed at driving more revenue and better earnings. Forecasters are calling for close to an 11% earnings growth for S&P 500 companies in the year ahead. Capital expenditures -- equipment, production facilities, new technologies, accretive acquisitions -- are part of the reason why.
In its Nov. 1 earnings report, Chevron reported that it had spent $10.6 billion in three months, exceeding Exxon (XOM) by $100 million. Chevron's CFO Patricia Yarrington said during the conference call that CVX's spending this year would finish 10% higher than planned. Ms. Yarrington said spending would settle down once Chevron's huge Australian liquefied natural gas projects are out of the way.
"We continue to make good progress on our major capital projects," CVX Chairman and CEO John Watson added. "Construction continues, and important milestones are being reached, on our Gorgon and Wheatstone LNG projects in Australia."
The CEO also said that, "Important interim construction goals have been recently reached for our Jack/St. Malo and Big Foot deepwater projects in the Gulf of Mexico, in preparation for their project start-ups scheduled for late 2014. We are also moving forward on the development of our liquids-rich unconventional properties in the U.S."Capital and exploratory expenditures in the first nine months of 2013 reached $28.9 billion, compared with $22.7 billion in the corresponding 2012 period. Chevron continues its long tradition of spending a meaningful amount of capital on equipment and projects that produce growth in the intermediate term while still paying an ample dividend to shareholders (around 3.4%) and maintaining a hefty stock buyback program.
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