Here is a crazy statistic that crossed my desk recently about the performance of the Big Oil supermajors in relation to the S&P 500 over the past twenty years: every single supermajor outperformed “the market” since July 8th, 1993.
Over that time frame, BP returnd 9.6% annually.
Total SA returned 10.9% annually.
Chevron returned 12.7% annually.
Exxon returned 11.8% annually.
Conoco returned 12.0% annually.
Meanwhile, the S&P 500 returned 8.6% annually.
The secret to the success of the big oil companies is that they are able to fire on all cylinders: they pay a healthy dividend, they buy back their own stock, and they put in the needed capital expenditures to fuel future growth. It is a great way to add meaningful diversification to your portfolio because when oil prices rise, most other S&P 500 stocks fall, and vice versa. That is to say, when oil prices are rising rapidly, your oil stocks will go up while your other holdings might experience a bit of a drag.