(Click on image to enlarge)

Investors today love tech. Tech is by far the biggest part of the market and it’s been the best performing for a long time. For those reasons, most investors tend to tune out the rest of the market. But that’s a mistake IMO. As much as technological innovation is driving our world forward, other sectors of the economy are essential as well. For example: Oil. They say that “Chips are the new oil” – and I’m a believer in that. But oil is still oil. That is, it’s still essential to the global economy and deserves a place in every investor’s portfolio. Further, because it’s overlooked valuations are compelling.

Exxon Mobil (XOM) and Chevron (CVX) both reported 3Q24 earnings Friday morning. These two behemoths have a combined market cap of $800 billion and make up nearly 40% of the S&P Energy Sector (XLE). How did their reports look? Quite good IMO. XOM’s Oil Equivalent Barrels Production Per Day is up 9.5% YTD to 4,071. Similarly, CVX’s production is up 10% YTD to 3,334. That’s quite good production growth for companies of this size.

The valuation here is also quite compelling at ~15x current year EPS. Plus you get a dividend greater than 3% with both stocks as well as XLE as a whole.

Further, there are macro factors supporting the price of oil. First, any escalation of the war in the Middle East could make oil supplies harder to come by, pushing up the price. Second, now that the Fed is lowering interest rates, this easier money is supportive of higher commodity prices in general, including oil.

For these reasons oil stocks are a terrific, conservative investment IMO. Top Gun has a healthy position in XLE and XOP (which gives more weight to smaller exploration and production companies than XLE).

More By This Author:

Reiterating Uber $1 Trillion
Mag 7 Fundamentals Are Stellar – But Valuations Are Stretched
The Homebuilders Are Fully Valued