We recently published a list of 7 Most Profitable Cheap Stocks To Invest In. In this article, we are going to take a look at where Exxon Mobil (NYSE:XOM) stands against the other most profitable cheap stocks to invest in.
Insights on Small Caps, Tech, and More
Sherry Paul, Morgan Stanley Private Wealth Management managing director, joined CNBC’s “Squawk Box” on October 8, to discuss her investment strategy amidst the current market trends. Despite the Russell 2000 being down a percent, Paul believes it’s the right time to strategically add to small caps, as they are ripe for M&A and have been teased out due to their dependence on domestic consumption.
Paul emphasizes that the key to navigating this market is to be selective and strategic, recommending a broadening out of investments across sectors in the S&P, with a focus on large caps, particularly in areas such as industrials, financials, and staples. She believes that the rates going lower, combined with the productivity-enhancing cost reduction kicker, will benefit these sectors. Paul also highlights the importance of dividend yields, which can add lower volatility to a portfolio.
Regarding large-cap tech stocks, Paul remains bullish, viewing it as a theme rather than an idea. She believes that corporations will invest in software and hardware upgrades, driven by their enormous cash balances and the need to cut costs as rates go lower. This will be a boost for the sector, although it’s a longer-term game, with a time horizon of 12-24 months.
Despite the S&P 500 near record levels, Tom Lee, co-founder of Fundstrat, an independent equity research firm, remains bullish, citing a strong economic backdrop, the Fed’s decision to cut rates, and stimulus policies in China as tailwinds that will support the market. He believes that the economy is resilient and that the Fed’s easing will lead to a continued bull market, with the S&P 500 potentially reaching 5700 or higher by the end of the year.
Lee acknowledges that there are some headwinds, including the looming election and rising oil prices, but believes that they will be offset by the tailwinds. He also notes that small caps, which have been the weakest area of the market since the Fed hike, are due for a rebound.
As the market continues to navigate through economic trends and global challenges, expert insights help provide valuable insights to make informed investment decisions.
Our Methodology
To compile our list of the 7 most profitable cheap stocks to invest in, we used the Finviz and Yahoo stock screeners to compile an initial list of the 40 largest companies by market cap that are trading at a forward P/E ratio of under 20 as of October 7. From that list, we narrowed our choices to 7 stocks with positive TTM net income and 5-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 5-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a major oil rig in the middle of the sea, pumping crude oil.
Exxon Mobil (NYSE:XOM)
Number of Hedge Fund Holders: 92
Forward P/E Ratio as of October 7: 15.32
TTM Net Income: $34.16 Billion
5-Year Net Income CAGR: 14.03%
ExxonMobil (NYSE:XOM) is a global energy giant with a diverse portfolio of operations spanning exploration and production, refining, manufacturing, and a range of upstream, downstream, and chemical activities. The company is making strategic investments in low-carbon technologies, including biofuels, and hydrogen while maintaining its leadership in the oil and gas sector.
In May, ExxonMobil (NYSE:XOM) acquired Pioneer Natural Resources for $60 billion. This acquisition is expected to boost the company’s oil and gas production, enhance operational efficiency, and create synergies across businesses. The company’s updated revenue structure suggests a 10.5% increase in total revenue in 2024 and an 11.5% increase in 2025 due to increased contribution from the Upstream segment. The company’s EBITDA is expected to increase by 8% in 2024 and 7% in 2025, due to a higher forecast for the Upstream segment’s revenue.
ExxonMobil (NYSE:XOM) presents a compelling investment opportunity in the energy sector. As of October 7, the stock has a forward P/E ratio of 15.32, ExxonMobil’s (NYSE:XOM) net income for the twelve months ending June 30, was $34.16 billion, a compound annual growth rate (CAGR) of 14.03% over the last 5 years.
Overall XOM ranks 3rd on our list of most profitable cheap stocks to invest in. While we acknowledge the potential of XOM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
