We recently published a list of 10 Most Undervalued S&P 500 Stocks to Buy Now. In this article, we are going to take a look at where Exxon Mobil Corporation (NYSE:XOM) stands against other undervalued S&P 500 stocks to buy now.

Earlier on March 13, Michael Cuggino, President and Portfolio Manager of the Permanent Portfolio Family of Funds, appeared on CNBC’s ‘The Exchange’ and began discussing his fund’s performance. Despite a challenging market environment, his fund achieved a 4% return this year, which he attributed to diversification rather than reliance on a single asset class like gold. The portfolio includes gold, silver, diversified equities, and bonds. When asked about market reactions to tariff-related headlines, Cuggino emphasized the importance of not overreacting to daily news fluctuations. He described the market’s behavior as herky-jerky and advised investors to focus on long-term opportunities rather than reacting impulsively. His base case anticipated some turbulence due to the transition under the new administration’s economic policies. His strategy involves identifying opportunities during volatile periods rather than making significant portfolio changes.

The discussion also featured David Zervos, Chief Market Strategist at Jefferies, who provided insights on Washington’s role in market volatility. Zervos acknowledged that while policies such as tariffs, immigration reforms, and drug policies were largely unfolding as expected, the speed of changes under the current administration was surprising investors. He pointed out rapid spending cuts and layoffs in the public sector as key contributors to market unease. For instance, courts recently ordered the federal government to rehire probationary employees who had been dismissed. Zervos likened this abrupt shift to transitioning from a public-sector-reliant economy to one driven by the private sector, which is a process that has introduced significant uncertainty. Regarding tariffs specifically, Zervos downplayed their overall impact on the US economy, which he described as domestically driven. While tariffs could affect specific industries like wine or automobiles with high overseas components, he argued that broader economic trends would be shaped by deregulation, reduced business costs, and a shift toward private-sector efficiency. He warned that the speed of these transitions could lead to short-term volatility but maintained optimism about long-term productivity gains.

Methodology

We used the Finviz stock screener to compile a list of the top S&P 500 stocks that had a forward P/E ratio under 15. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 1000 elite money managers.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

An aerial view of an oil rig in the Texas Gulf Coast with people working on it, emphasizing the company's oil & gas production interests.

Exxon Mobil Corporation (NYSE:XOM)

Forward P/E Ratio as of March 14: 13.61

Number of Hedge Fund Holders: 104

Exxon Mobil Corporation (NYSE:XOM) is a global energy company that explores, produces, refines, and markets crude oil, natural gas, petrochemicals, and specialty products. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments, and is also pursuing lower-emission technologies.

The company’s Upstream segment explores and produces oil and gas and achieved record production in 2024 due to the strong performance in the Permian Basin and Guyana. Permian production is projected to reach 2.3 million barrels per day by 2030, which will be up from 1.5 million in 2024. In 2025, the company will implement projects like Yellowtail in Guyana and advanced Permian recovery techniques, and focus on low-cost, low-emission, and high-return growth. Yellowtail is Guyana’s largest deepwater oil project, and advanced techniques boost Permian Basin oil and gas extraction.

Guyana, which is enriched by Exxon Mobil Corp.’s (NYSE:XOM) oil discoveries, is pursuing a gas partnership with Suriname to build an industrial hub. Guyana President aims to diversify the economy with gas-powered industries and regional energy security. Exxon Mobil Corp. (NYSE:XOM) is exploring gas development options, and stands to benefit from increased production and potential new infrastructure development in the region.

Madison Dividend Income Fund favors Exxon Mobil Corp. (NYSE:XOM) because of its strategic assets, efficient operations, planned production growth, and strong shareholder return policy. Here’s what it stated regarding the company 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, XOM ranks 3rd on our list of the most undervalued S&P 500 stocks to buy now. While we acknowledge the growth potential of XOM as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. 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.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.