Charlie Garcia
Founder & Managing Partner of R360, Entrepreneur/Author, Veteran
Occidental Petroleum is mispriced at about 8.4x trailing earnings and an 8.7% free cash flow yield during an oil shock. Eight times earnings in an oil shock is not a valuation but a clerical error with a ticker symbol. Iran cannot beat the US Navy, so it is waiting out America's vote in 49 days, since Iran does not vote until 2028; owning Occidental beats hiding in Treasuries. x.comÂ
Occidental Petroleum looks cheap against its sales, trading 32% below the low end of a $88.24-$112.30 fair-value range set at about 5 times mid-cycle sales. It carries a PEG of 0.87 and a forward P/E of 15.7x, and would only look expensive above $105.52. These are valuation levels from reported earnings and revenue estimates, not fundamental work. x.comÂ
Low forward earnings multiples alongside strong investor sentiment put these S&P 500 stocks atop the smart-value ranking. APA, Viatris, EOG, Marathon Petroleum, Valero, Phillips 66, Allstate, Diamondback, Everest and Centene trade at 6-15x forward earnings after one-year gains of 17-150%; the accompanying ranking also weighs free-cash-flow yield and momentum. x.comÂ
Occidental Petroleum's reputation was wrecked by former CEO Vicki Hollub, and it has not been worth buying at any point in the past six years. The Anadarko acquisition came at peak 2019 oil prices and was far too large; Berkshire's 8% cumulative perpetual preferred deal helped avoid a shareholder vote. Occidental went from an A-rated balance sheet to about three years of junk status, losing 18 years of dividend increases. Buy-and-hold oil and gas only offers alpha 2-3 times a decade. x.com x.comÂ
US energy stocks remain the trade because the Iran war keeps hitting oil supply; it is not a dip-buying chance in tech. Iran struck more Persian Gulf energy sites, including the Fujairah bypass route, erasing Monday's relief rally and lifting Brent back above $104. Hormuz is still contested, tanker insurance stays high, and the IEA's record 400 million-barrel release did not stop the climb. Chevron, Marathon Petroleum, Valero, Occidental and Phillips 66 held green as stock futures fell. x.com … Show more
EOG Resources is deeply undervalued on EV/EBITDA, a big discount given where oil prices are now, and the chart looks strong. x.comÂ
TotalEnergies looks cheap against its earnings at 11x trailing and 8x next year's, while oil and gas producers usually get 14x. Applying 14x to mid-cycle EPS of $8.01 gives a fair range of $98.74 to $125.67 versus $90.94 now. Trailing and forward earnings differ by 34%, widening the range. This is a valuation read only, not fundamental work. x.comÂ
EOG Resources is cheap against its sales, with fair value at $221.66 to $282.12, or 5x mid-cycle sales give or take 12%. At $141.31 it trades 36% below the low end of fair, with a pullback zone at $115.65. This is a levels-only read off reported earnings and revenue estimates, with no fundamental work. x.comÂ
Valero looks expensive against its earnings, trading at 17x, or 10x next year's, versus the usual 9x for oil and gas producers. At 9x mid-cycle EPS of $22.12, give or take 12%, fair value is $177.34-$225.71, so the $406.30 price is 80% above fair, though trailing and forward reads differ by 63%. This is a valuation read off reported earnings and estimates only, with no fundamental work. x.comÂ
Oil majors such as Shell, BP, ExxonMobil and Chevron deserve their multiples because they have consistently generated 10%+ returns across complete energy cycles. They are integrated, now diversified, and control a key commodity for decades ahead. Investors will do fine if they hold for the long term. x.comÂ
Petrobras looks cheap against its earnings at 6x forward earnings, versus the roughly 14x oil and gas producers usually get. Applying 14x to next year's estimated $4.14 a share gives a fair range of about $51 to $65, leaving the stock 52% below the low end. The view rests on valuation levels from reported earnings and revenue estimates only, not fundamental work. x.comÂ
