Fossil Fuel Fossils?

Here I am in silence
Looking 'round without a clue
I find myself alone again
All alone with you
--Information Society

Is it possible to find value in markets that mark all time highs seemingly every day? With thousands of stocks to choose from, it is likely that investors overlook some attractive names here and there--no matter how 'efficient' markets behave.

While diligent investors will likely stumble upon an attractive situation on occasion, it seems less probable that an entire sector remains undervalued after the run we've had. My sense, however, is that energy may offer an exception. This sector has under-performed now for some time.

I get the bear story. With green narratives and ESG (environmental, sustainable, governance) agendas echoing in fund managers heads, 'carbonated' energy producers' days are numbered. Fossil fuel makers are, well, fossils.

Perhaps, but even if the 'common wisdom' turns out to be true in this case, it will likely take decades to play out. Meanwhile, daily life demands energy of the old fashioned variety.

I like the integrated oils--particularly the two big US players, Exxon (XOM) and Chevron (CVX). Both have strong internal cultures and exemplary management. Because they are headquartered in the US, I can keep an eye on them and their operating/institutional environments far better than I can their international peers.

XOM appears to be resolving a near term triangle pattern to the downside (bearish) but as a long term investor this presents opportunity. Here is a company with a dominant worldwide production footprint with a capex plan to make it even larger, strong culture with a long track record of execution, and a 5% dividend yield.

CVX has a more benign technical pattern. Also well managed, CVX is dialing back on capex a bit after some big spending. The stocks yields just above 4% here.

I also view these names as inflation hedges in an environment that, increasingly, is being shaped by monetization policies of central banks.

Unloved, strong competitive positions, strong dividend yields, inflation hedge. I'm happy to take the other side of the fossil fuel fossil trade here.

position in CVX, XOM