3 Big Oil Stocks Warren Buffett Might Love Now - Cabot Wealth Network

3 Big Oil Stocks Warren Buffett Might Love Now

Warren Buffett became the world's greatest investor by finding undervalued stocks. These three big oil stocks are right up his alley.

Big oil refinery owned by energy stocks

Before we dig into a handful of big oil stocks, I’d like to touch a bit on what makes Warren Buffett arguably the most successful investor alive today.

How does he do it?

Warren Buffett says he realized he was going to be rich very early on in his career. It was during his honeymoon out west that he figured it out:

“When I visited the casino and saw all these smart, well-dressed people participating in a game with the odds against them, it was then that I realized I won’t have a problem getting rich!”

Buffett realized that Wall Street works the same way.

“There seems to be some perverse human characteristic that likes to make easy things difficult,” he says.

How to Find Undervalued Stocks

How to Find Undervalued Stocks

A growing number of undervalued stocks are available for the conservative, steady investor to snap up and hold for long-term gain. It’s an exciting time to be a long-term, value investor! And we have a FREE Special Report, How to Find Undervalued Stocks, to help you get started.

Get My Free Report!

So Buffett did the opposite. He looked for companies trading at steep discounts to their real value. He did his homework, made sure they were financially strong with positive earnings. Then he bought them, waiting for the market to recognize his foresight. That got me thinking about big oil stocks today. More on those in a minute.

Buffett’s record using this strategy is mind-boggling. Over one 13-year period, for instance, he averaged an annual gain of 29.5% without even one losing year.

Buffett learned value investing from his professor at Columbia University, Benjamin Graham, who wrote the bible on value investing and put it to work on behalf of his clients, summarized in his firm’s 1946 shareholder letter:

“(The goal is) to purchase securities at prices less than their intrinsic value … with particular emphasis on purchase of securities at less than their liquidating value.”

Time to Switch from Growth to Value?

Throughout this century, value stocks have done very well but over the last decade, growth stocks have been decidedly winning the popularity contest.

Now, given the recent sell-off in growth stocks, the tide seems to be shifting back to value investing.

To take advantage of that shift, you need a strategy to avoid the “dead money” trap.

By purchasing shares worth less than the hard assets the company holds, you give yourself huge upside potential with limited downside risk.

But you need to do your homework and evaluate a company’s financial situation and understand just why a stock is trading below its real value.

The next step is to figure out what events will “unlock” this hidden value. You need to find and confirm several catalysts and then see the stock begin an uptrend – to begin to bounce – before investing.

Big Opportunity in Big Oil Stocks

The oil sector is perhaps the best near-term opportunity for value investors.

Energy stocks have bounced back nicely in recent months after hitting rock-bottom a year ago, as oil prices are still near multi-year highs. But most big oil stocks still trade at a discount.

Take Chevron (CVX), Exxon Mobil (XOM) and Shell (SHEL).

Chevron is perhaps the most expensive of the three on an historical basis, trading at 15.6 times forward earnings and at all-time highs.

Exxon, which is still a cash machine, has been spending more aggressively than competitors on increasing production and offers a 3.66% dividend yield, and trades at 15.8 times forward earnings.

Shell is a super major that has ambitious plans to steadily increase its footprint in green energy while it continues to leverage its production in the Permian Basin. And despite being up 23% so far this year, the stock remains cheap at just 9.9 times forward earnings.

But big oil stocks aren’t the only great value out there. Good deals are scattered all over the globe right now, and I search far and wide for them in my Cabot Explorer advisory, which recommends the best stocks from around the world. My Explorer portfolio has an average return of better than 60%!

Click here to join the Cabot Explorer and learn which stocks from around the world I’m currently recommending.

Would you, or do you, invest in these big oil stocks? Why or why not?

Carl Delfeld

The Best Stocks in the World

Carl Delfeld is your guide to growth trends and bull markets around the world. His Cabot Explorer will show you the vast profit potential of investing in emerging economies as well as other world stock markets.

Learn More

*This post has been updated from an original version, published in 2020.


You must log in to post a comment.

Enter Your Log In Credentials

This setting should only be used on your home or work computer.

Need Assistance?

call Cabot Wealth Network Customer Service at

1 (800) 326-8826