We recently published a list of 9 Best AI Energy Infrastructure Stocks to Buy Now. Since Exxon Mobil Corp (NYSE:XOM) ranks 1st on the list, it deserves a deeper look.
Rob Thummel, senior portfolio manager at Tortoise Capital Advisors, while talking to CNBC in a latest program, said that he sees a big opportunity for AI in the energy industry. Thummel said that while everybody keeps talking about technology infrastructure when it comes to AI, they “forget” about energy infrastructure.
Thummel said that AI will create electricity demand that will in turn fuel the need for natural gas.
“There is no AI without EI (energy infrastructure) because you need this critical infrastructure to provide the fuel to keep their lights on and electricity flowing 24 hours a day.”
Talking about energy stocks, Thummel said a lot of them are “pretty simple stories” as they generate a lot of cash flows and return a significant portion of it back to shareholders.
Asked about the cyclical nature of the industry, Thummel said that global energy demand is currently at its peak and has grown for 38 years over the last four decades. The analyst said the demand for energy increases every year across the world. Thummel said the US has become the largest energy exporter and he does not see that changing for a long time.
Thummel also shared some of his top picks in the energy sector. For this article we scanned his portfolio and chose his top AI energy infrastructure picks. With each stock we have mentioned the total number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? 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).
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Exxon Mobil Corp (NYSE:XOM)
Number of Hedge Fund Investors: 81
XOM is an important name in Tortoise Capital’s portfolio.
With over four decades of consistent dividend growth, Exxon Mobil Corp (NYSE:XOM) is one of the best dividend aristocrat stocks to buy now. Over the past five years, Exxon Mobil Corp’s (NYSE:XOM) dividend growth rate came in at 2.20% per year. Exxon Mobil Corp’s (NYSE:XOM) future looks bright. Exxon Mobil Corp (NYSE:XOM) has pledged a whopping $20 billion and $25 billion in annual capex spending through 2027. During the first nine months of last year, Exxon Mobil Corp’s (NYSE:XOM) FCF came in at $28.1 billion. Out of that, just $11.1 billion were paid in dividends. Exxon Mobil Corp’s (NYSE:XOM) payout ratio is just 46%, which means it’s spending for business growth, a healthy sign.
As of the end of the first quarter of 2024, 81 hedge funds reported owning stakes in Exxon Mobil Corp (NYSE:XOM). The biggest stakeholder of Exxon Mobil Corp (NYSE:XOM) during this period was Ken Fisher’s Fisher Asset Management which owns a $3 billion stake in Exxon Mobil Corp (NYSE:XOM).
Madison Dividend Income Fund stated the following regarding Exxon Mobil Corporation (NYSE:XOM) in its first quarter 2024 investor letter:
“This quarter we are highlighting Exxon Mobil Corporation (NYSE:XOM) as a relative yield example in the Energy sector. XOM is a leading integrated oil and natural gas company. It has upstream assets that develop and produce oil and natural gas, along with downstream refining and chemical manufacturing assets. We believe it has attractive low-cost acreage in the Permian basin and has a sizeable growth opportunity in Guyana. Further, we think XOM has a sustainable competitive advantage due to size and scale, and its ability to integrate refining and chemical assets provides a low-cost advantage versus competitors.
Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per year through 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
Overall, Exxon Mobil Corp (NYSE:XOM) ranks 1st on Insider Monkey’s list titled 9 Best AI Energy Infrastructure Stocks to Buy Now. While we acknowledge the potential of Exxon Mobil Corp (NYSE:XOM), 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 CVX 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.
