The past few years has seen tremendous growth in alternative energy plays. And in a push for more environmentally-friendly ways of doing business. That’s led some to see the end of old-school energy companies like big oil plays.
But most renewable technology can’t scale well or still remains ineffective for areas such as transportation. That’s why it’s likely that oil and natural gas will still be valuable commodities for some time.
That’s why investors shouldn’t overlook some of the big energy plays here. Even though ExxonMobil (XOM) hit a new 52-week high last week, the energy company still remains fairly cheap thanks to higher energy prices.
With those high prices likely to last, shares still look inexpensive at under 10 times forward earnings. Earnings are up nearly 280 percent in the past year, with revenue up 70 percent. That will continue to rise at current oil prices, even if the year-over-year numbers moderate.
Action to take: Shares are worth picking up on any down day. The company is also a dividend growth play, with a starting yield of about 3.5 percent here.
For traders, the March $120 calls, last going for about $4.25, are likely to gain as shares trend higher in the coming months. Traders can leverage a small move higher in shares into a high-double-digit gain before expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.