Many investors are concerned about the valuations of the major market averages, whose returns has been fueled by a handful of mega-cap stocks, suggests John Buckingham, value oriented investor and editor of The Prudent Speculator.

Nevertheless, the value group is about as attractive today relative to growth as at any time since the bursting of the Tech Bubble back at the turn of the Millennium.

That is not to say that the reports out of Gaza/Israel/Ukraine are not worrisome, while we realize that there is plenty of uncertainty about Federal Reserve policy, the economy and the strength of corporate profits.

Still, we know equities have overcome dozens of disconcerting events through the years. Geopolitical developments are always a wildcard, but equities heretofore have always managed to overcome scary headlines to go on to post handsome gains for those who remember that the secret to success in stocks is to not get scared out of them.

So, while we are always braced for downside volatility, we remain optimistic about the long-term prospects for equities, and we are buoyed by the calendar, not just for the seasonally favorable November to April time span but also for the upcoming historically more-positive Fourth Year of the Presidential Cycle.

Chevron (CVX) is the second-largest integrated energy company by market capitalization in the United States. Predominately driven by its upstream segment (exploration & production) with operations in North America, Europe, Africa, Asia and Australia that combine for more than 3 million barrels of oil equivalent production per day.

While energy prices are notoriously volatile, Chevron has meaningfully improved its leverage profile, paying down $14 billion of debt since 2018.

Of course, the firm lately has been busy on the M&A front in 2023, using stock to acquire PDC Energy in August for $6.5 billion and entering an agreement in October to purchase Hess Corp for $53 billion in stock, the latter sending shares down double-digits and leading to our recommendation, as Hess brings significant potential from its progress in Guyana that is expected to bear fruit next year.

While fossil fuels will drive the company forward for the foreseeable future, management has been vocal about its priorities toward decarbonization and will spend $10 billion toward hydrogen and renewable fuels, carbon capture, utilization and storage by 2028. Shares trade for just 10 times NTM EPS estimates and offer a 4.2% yield, with the dividend payout having grown 6% per annum over the past five years.

Devon Energy (DVN) is a Texas-based oil & gas exploration & production company with a production target of about 650,000 barrels of oil equivalent per day. Most of this production comes from the more than 400,000 acres Devon owns in the abundant Permian Basin and is split almost equally between oil and gas/NGL.

Shares have followed oil and gas prices lower since mid-2022, but a breakeven cost under $40 per barrel of West Texas Crude leaves plenty of profit potential. We like that management has stated a commitment to restraining production to focus on per share profitability and returning excess capital to shareholders.

Indeed, more than $10 per share have been doled out via dividends over the past three years (Devon was the first E&P to implement the ever-popular fixed-plus-variable structure that has been adopted by many of its peers), while the share count has fallen by 6% from buybacks over the same period. Even as fossil fuel prices have a tendency to be erratic, shares trade for just 7 times profits expected in each of the next few years.

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