10 Best Fossil Fuels for February 2026
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Market Overview & Selection Criteria
The current investment landscape presents compelling opportunities across energy, financial services, and consumer sectors[1]. This curated watchlist identifies 10 fundamentally strong companies selected through ValueSense's proprietary intrinsic value analysis and machine learning-driven screening methodology[1]. Our selection criteria emphasize companies trading at discounts to their calculated intrinsic values, supported by solid free cash flow generation and reasonable debt levels. The portfolio spans traditional energy majors, emerging fintech leaders, and established consumer brands—offering diversification across cyclical and growth-oriented segments.
Featured Stock Analysis
Exxon Mobil Corporation (XOM)
| Metric | Value |
|---|---|
| Market Cap | $604.9B |
| Quality Rating | 6.4 |
| Intrinsic Value | $70.4 |
| 1Y Return | 30.2% |
| Revenue | $327.3B |
| Free Cash Flow | $18.4B |
| Revenue Growth | (3.5%) |
| FCF margin | 5.6% |
| Gross margin | 24.8% |
| ROIC | 7.8% |
| Total Debt to Equity | 26.4% |
Investment Thesis
Exxon Mobil represents one of the largest integrated energy companies globally, with a market cap of $604.9B and a Quality rating of 6.4—among the highest in this watchlist[1]. The company generated $327.3B in revenue with $18.4B in free cash flow, demonstrating substantial capital generation capability. ValueSense's intrinsic value analysis suggests a fair value of $70.4, positioning the stock for potential upside as energy markets stabilize. The company's 30.2% one-year return reflects strong recent performance, driven by elevated commodity prices and operational efficiency gains.
XOM's 7.8% ROIC and 24.8% gross margin indicate effective capital deployment and pricing power within its integrated operations. The 26.4% debt-to-equity ratio remains manageable, providing financial flexibility for dividends and strategic investments. Despite a -3.5% revenue decline, the company's substantial free cash flow margin of 5.6% underscores the resilience of its business model in converting revenues to shareholder returns.
Key Catalysts
- Energy transition investments and renewable portfolio expansion
- Upstream production growth from major projects coming online
- Sustained cash returns through dividends and buybacks
- Operational efficiency improvements across refining and chemicals segments
Risk Factors
- Commodity price volatility affecting earnings and cash flow
- Regulatory pressures on fossil fuel operations
- Long-term energy transition risks to traditional oil and gas demand
- Geopolitical disruptions impacting global supply chains
Chevron Corporation (CVX)
| Metric | Value |
|---|---|
| Market Cap | $347.3B |
| Quality Rating | 5.4 |
| Intrinsic Value | $103.8 |
| 1Y Return | 14.4% |
| Revenue | $187.0B |
| Free Cash Flow | $10.8B |
| Revenue Growth | (5.2%) |
| FCF margin | 5.8% |
| Gross margin | 18.4% |
| ROIC | N/A |
| Total Debt to Equity | 21.9% |
Investment Thesis
Chevron operates as a diversified energy company with a $347.3B market cap and Quality rating of 5.4. The company reported $187.0B in annual revenue with $10.8B in free cash flow, reflecting solid operational performance across upstream, downstream, and midstream segments. ValueSense's analysis indicates an intrinsic value of $103.8, suggesting potential value recognition as market conditions evolve. The 14.4% one-year return demonstrates steady appreciation, though more modest than some energy peers.
CVX's 18.4% gross margin and 5.8% FCF margin reflect the capital-intensive nature of integrated energy operations. The 21.9% debt-to-equity ratio is among the most conservative in the energy sector, providing substantial financial stability. The -5.2% revenue decline reflects commodity headwinds, yet the company maintains disciplined capital allocation focused on shareholder distributions and high-return projects.
Key Catalysts
- Permian Basin production ramp-up and cost reduction initiatives
- Dividend growth supported by strong cash generation
- Strategic acquisitions and partnerships in energy transition
- Operational excellence driving margin expansion
Risk Factors
- Exposure to crude oil and natural gas price fluctuations
- Execution risks on major capital projects
- Regulatory and environmental compliance costs
- Competition from renewable energy alternatives
Shell plc (SHEL)
| Metric | Value |
|---|---|
| Market Cap | $224.2B |
| Quality Rating | 5.7 |
| Intrinsic Value | $108.0 |
| 1Y Return | 16.8% |
| Revenue | $268.7B |
| Free Cash Flow | $25.9B |
| Revenue Growth | (9.5%) |
| FCF margin | 9.7% |
| Gross margin | 18.8% |
| ROIC | 10.9% |
| Total Debt to Equity | 41.6% |
Investment Thesis
Shell is a global energy leader with a $224.2B market cap and Quality rating of 5.7. The company generated $268.7B in revenue with an impressive $25.9B in free cash flow—the highest absolute FCF among energy peers in this watchlist. ValueSense's intrinsic value calculation suggests $108.0, reflecting the company's substantial cash generation capability. The 16.8% one-year return demonstrates solid performance, supported by operational excellence and disciplined capital management.
Shell's 10.9% ROIC is the strongest among traditional energy majors, indicating superior capital efficiency. The 9.7% FCF margin demonstrates exceptional conversion of revenues to free cash, supporting both dividends and strategic investments. The 41.6% debt-to-equity ratio is moderate for the sector, though elevated compared to some peers. Despite a -9.5% revenue decline, Shell's cash generation remains robust, underpinning shareholder returns.
Key Catalysts
- Liquefied natural gas (LNG) expansion and pricing strength
- Integrated gas and renewables strategy execution
- Dividend sustainability and potential increases
- Cost reduction and operational efficiency programs
Risk Factors
- Commodity price sensitivity, particularly natural gas
- Energy transition execution risks and capital requirements
- Regulatory pressures in key markets
- Geopolitical exposure in production regions
TotalEnergies SE (TTE)
| Metric | Value |
|---|---|
| Market Cap | $159.9B |
| Quality Rating | 5.5 |
| Intrinsic Value | $94.7 |
| 1Y Return | 23.3% |
| Revenue | $183.9B |
| Free Cash Flow | $12.9B |
| Revenue Growth | (9.5%) |
| FCF margin | 7.0% |
| Gross margin | 16.7% |
| ROIC | 9.7% |
| Total Debt to Equity | 53.9% |
Investment Thesis
TotalEnergies operates as an integrated energy company with a $159.9B market cap and Quality rating of 5.5. The company reported $183.9B in revenue with $12.9B in free cash flow, reflecting diversified operations across oil, gas, and renewable energy. ValueSense's analysis suggests an intrinsic value of $94.7, indicating potential upside from current valuations. The 23.3% one-year return reflects strong market recognition of the company's strategic positioning.
TTE's 9.7% ROIC and 7.0% FCF margin demonstrate effective capital deployment across its diversified portfolio. The 16.7% gross margin reflects competitive positioning in global energy markets. The 53.9% debt-to-equity ratio is elevated but manageable given the company's cash generation. The -9.5% revenue decline reflects commodity headwinds, yet the company maintains strategic investments in renewables and hydrogen.
Key Catalysts
- Renewable energy capacity expansion and profitability improvement
- Oil and gas production growth from major projects
- Hydrogen and low-carbon solutions commercialization
- Strategic partnerships in energy transition
Risk Factors
- Commodity price volatility affecting earnings
- Energy transition execution and capital intensity
- Regulatory changes in key European markets
- Integration risks from strategic acquisitions
ConocoPhillips (COP)
| Metric | Value |
|---|---|
| Market Cap | $129.2B |
| Quality Rating | 6.3 |
| Intrinsic Value | $114.4 |
| 1Y Return | 3.6% |
| Revenue | $60.2B |
| Free Cash Flow | $16.6B |
| Revenue Growth | 8.1% |
| FCF margin | 27.6% |
| Gross margin | 30.1% |
| ROIC | 5.4% |
| Total Debt to Equity | 36.2% |
Investment Thesis
ConocoPhillips is a pure-play exploration and production company with a $129.2B market cap and Quality rating of 6.3—tied for the highest quality rating in this watchlist. The company generated $60.2B in revenue with $16.6B in free cash flow, demonstrating exceptional cash generation relative to revenue. ValueSense's intrinsic value analysis suggests $114.4, indicating potential value recognition. The modest 3.6% one-year return suggests the market has not fully recognized the company's fundamental strength.
COP's standout metric is its 27.6% FCF margin—the highest among all featured stocks—reflecting the capital-efficient nature of its upstream-focused business model. The 30.1% gross margin demonstrates strong pricing power and operational leverage. The 36.2% debt-to-equity ratio is moderate, and notably, COP is the only energy company in this list with positive 8.1% revenue growth, driven by production increases and strategic acquisitions. The 5.4% ROIC reflects the capital intensity of exploration and production operations.
Key Catalysts
- Alaska LNG project development and monetization
- Organic production growth from existing assets
- Strategic acquisitions expanding resource base
- Disciplined capital allocation and shareholder returns
Risk Factors
- Crude oil price sensitivity and volatility
- Project execution risks on major developments
- Regulatory and permitting challenges
- Reserve replacement and production decline management
Enbridge Inc. (ENB)
| Metric | Value |
|---|---|
| Market Cap | $106.2B |
| Quality Rating | 5.1 |
| Intrinsic Value | $83.5 |
| 1Y Return | 11.4% |
| Revenue | $64.3B |
| Free Cash Flow | $3,965.0M |
| Revenue Growth | 32.6% |
| FCF margin | 6.2% |
| Gross margin | 25.6% |
| ROIC | 5.5% |
| Total Debt to Equity | 159.1% |
Investment Thesis
Enbridge is a North American midstream and energy infrastructure company with a $106.2B market cap and Quality rating of 5.1. The company reported $64.3B in revenue with $3.965B in free cash flow, reflecting its role as a critical energy transportation and distribution network. ValueSense's intrinsic value calculation suggests $83.5, indicating potential upside. The 11.4% one-year return demonstrates steady appreciation, supported by stable cash flows from long-term contracts.
ENB's 32.6% revenue growth is exceptional and reflects strategic acquisitions and organic expansion of its midstream platform. The 25.6% gross margin and 6.2% FCF margin demonstrate the profitability of infrastructure assets. However, the 159.1% debt-to-equity ratio is notably elevated, reflecting the capital-intensive nature of pipeline and infrastructure investments. This leverage is typical for midstream companies but warrants monitoring. The 5.5% ROIC reflects the lower-return nature of regulated infrastructure assets.
Key Catalysts
- Continued expansion of crude oil and natural gas transportation capacity
- Renewable energy infrastructure investments
- Dividend growth supported by stable contract revenues
- Strategic acquisitions enhancing network connectivity
Risk Factors
- High leverage limiting financial flexibility
- Regulatory changes affecting tariff structures
- Energy transition risks to fossil fuel transportation demand
- Interest rate sensitivity given debt-heavy capital structure
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Starbucks Corporation (SBUX)
| Metric | Value |
|---|---|
| Market Cap | $104.2B |
| Quality Rating | 6.2 |
| Intrinsic Value | $47.5 |
| 1Y Return | -15.2% |
| Revenue | $37.7B |
| Free Cash Flow | $2,336.9M |
| Revenue Growth | 4.3% |
| FCF margin | 6.2% |
| Gross margin | 32.0% |
| ROIC | 8.8% |
| Total Debt to Equity | (399.9%) |
Investment Thesis
Starbucks is a global consumer discretionary leader with a $104.2B market cap and Quality rating of 6.2. The company generated $37.7B in revenue with $2.337B in free cash flow, reflecting its position as the world's largest coffee chain. ValueSense's intrinsic value analysis suggests $47.5, indicating potential value opportunity. The -15.2% one-year return reflects recent operational challenges and market concerns, creating a potential entry point for value-oriented investors.
SBUX's 32.0% gross margin is exceptional for the consumer discretionary sector, demonstrating strong pricing power and operational leverage. The 8.8% ROIC reflects efficient capital deployment across company-operated and licensed stores. The 4.3% revenue growth is modest, reflecting market saturation in developed markets and operational headwinds. Notably, the -399.9% debt-to-equity ratio indicates negative equity, reflecting substantial share buybacks and capital returns to shareholders—a sign of management confidence in long-term value creation.
Key Catalysts
- Same-store sales recovery and traffic stabilization
- International expansion, particularly in China
- Digital innovation and loyalty program monetization
- Cost management and operational efficiency improvements
Risk Factors
- Consumer spending slowdown affecting discretionary purchases
- Labor cost inflation and unionization pressures
- Competition from local and emerging coffee chains
- Negative equity structure limiting financial flexibility
Petróleo Brasileiro S.A. - Petrobras (PBR)
| Metric | Value |
|---|---|
| Market Cap | $99.6B |
| Quality Rating | 6.1 |
| Intrinsic Value | $32.9 |
| 1Y Return | 8.6% |
| Revenue | $86.4B |
| Free Cash Flow | $15.9B |
| Revenue Growth | (11.6%) |
| FCF margin | 18.4% |
| Gross margin | 48.1% |
| ROIC | 8.8% |
| Total Debt to Equity | 88.5% |
Investment Thesis
Petrobras is Brazil's state-controlled oil company with a $99.6B market cap and Quality rating of 6.1. The company reported $86.4B in revenue with $15.9B in free cash flow, demonstrating strong cash generation from its integrated operations. ValueSense's intrinsic value calculation suggests $32.9, indicating potential upside from current valuations. The 8.6% one-year return reflects steady appreciation, supported by operational excellence and commodity strength.
PBR's standout metric is its 48.1% gross margin—the highest among all featured stocks—reflecting the profitability of Brazilian offshore production and refining operations. The 18.4% FCF margin demonstrates exceptional cash conversion, supporting dividends and debt reduction. The 8.8% ROIC reflects efficient capital deployment. However, the 88.5% debt-to-equity ratio is elevated, reflecting historical leverage, though the company has been actively reducing debt. The -11.6% revenue decline reflects commodity headwinds, yet cash generation remains robust.
Key Catalysts
- Pre-salt production ramp-up and cost reduction
- Debt reduction and improved financial metrics
- Dividend sustainability and potential increases
- Strategic partnerships in renewable energy
Risk Factors
- Brazilian political and regulatory uncertainty
- Commodity price volatility affecting earnings
- High leverage limiting financial flexibility
- Currency fluctuations impacting international operations
BP p.l.c. (BP)
| Metric | Value |
|---|---|
| Market Cap | $98.4B |
| Quality Rating | 5.5 |
| Intrinsic Value | $32.4 |
| 1Y Return | 21.5% |
| Revenue | $188.0B |
| Free Cash Flow | $10.7B |
| Revenue Growth | (3.9%) |
| FCF margin | 5.7% |
| Gross margin | 16.7% |
| ROIC | 6.7% |
| Total Debt to Equity | 96.4% |
Investment Thesis
BP is a global integrated energy company with a $98.4B market cap and Quality rating of 5.5. The company generated $188.0B in revenue with $10.7B in free cash flow, reflecting diversified operations across upstream, downstream, and renewable energy. ValueSense's analysis suggests an intrinsic value of $32.4, indicating potential value recognition. The 21.5% one-year return demonstrates strong recent performance, supported by operational improvements and energy market dynamics.
BP's 16.7% gross margin and 5.7% FCF margin reflect competitive positioning in global energy markets. The 6.7% ROIC indicates reasonable capital efficiency. However, the 96.4% debt-to-equity ratio is elevated, reflecting the company's historical leverage and capital intensity. The -3.9% revenue decline reflects commodity headwinds, yet the company maintains strategic investments in renewable energy and hydrogen. BP's transformation toward low-carbon energy represents a significant strategic shift.
Key Catalysts
- Renewable energy capacity expansion and profitability
- Hydrogen and biofuels commercialization
- Upstream production optimization and cost reduction
- Dividend growth supported by cash generation
Risk Factors
- High leverage limiting financial flexibility
- Energy transition execution risks and capital requirements
- Commodity price sensitivity
- Regulatory pressures on fossil fuel operations
Nu Holdings Ltd. (NU)
| Metric | Value |
|---|---|
| Market Cap | $87.4B |
| Quality Rating | 6.8 |
| Intrinsic Value | $80.4 |
| 1Y Return | 32.1% |
| Revenue | $13.5B |
| Free Cash Flow | $3,665.8M |
| Revenue Growth | 28.5% |
| FCF margin | 27.1% |
| Gross margin | 43.0% |
| ROIC | 35.8% |
| Total Debt to Equity | 23.1% |
Investment Thesis
Nu Holdings represents a compelling growth opportunity in the fintech sector with a $87.4B market cap and the highest Quality rating of 6.8 in this watchlist. The company generated $13.5B in revenue with $3.666B in free cash flow, demonstrating strong profitability for a growth-stage fintech platform. ValueSense's intrinsic value analysis suggests $80.4, indicating potential upside. The exceptional 32.1% one-year return reflects market recognition of the company's growth trajectory and market leadership in Latin America.
NU's metrics are exceptional: 43.0% gross margin reflects the high-margin nature of digital financial services, 27.1% FCF margin demonstrates superior cash conversion, and 35.8% ROIC is the highest among all featured stocks—indicating exceptional capital efficiency. The 28.5% revenue growth demonstrates strong market expansion and customer acquisition. The 23.1% debt-to-equity ratio is conservative, providing financial flexibility for growth investments. NU represents a fundamentally different investment profile—a high-growth fintech leader rather than a traditional energy or consumer company.
Key Catalysts
- Continued user growth and market penetration in Latin America
- Expansion into new financial services and products
- Profitability expansion as scale increases
- Potential geographic expansion beyond Latin America
Risk Factors
- Regulatory changes affecting fintech operations
- Competition from traditional banks and other fintech platforms
- Currency fluctuations in Latin American markets
- Technology and cybersecurity risks
Portfolio Diversification Insights
This 10-stock watchlist provides meaningful diversification across three distinct sectors: energy (7 stocks), consumer discretionary (1 stock), and financial services (1 stock), with one additional infrastructure play. The energy concentration reflects the sector's current valuation opportunities and cash generation strength, while the inclusion of Starbucks and Nu Holdings provides exposure to consumer and fintech growth narratives.
Sector allocation strategy: - Energy majors (XOM, CVX, SHEL, TTE, BP) offer stable cash flows and dividend yields - Pure-play upstream (COP) provides leveraged exposure to commodity prices - Midstream infrastructure (ENB) delivers stable, contract-backed revenues - Consumer discretionary (SBUX) offers valuation opportunity with operational recovery potential - High-growth fintech (NU) provides exposure to emerging market financial services disruption
The portfolio balances cyclical energy exposure with growth-oriented fintech and consumer discretionary positions. Quality ratings range from 5.1 to 6.8, indicating a focus on fundamentally sound companies. Free cash flow margins vary significantly—from 5.6% (XOM) to 27.6% (COP)—reflecting different business models and capital intensities.
Market Timing & Entry Strategies
Valuation-based entry approach: ValueSense's intrinsic value analysis provides a framework for disciplined entry. Stocks trading below intrinsic value—such as COP ($114.4 intrinsic vs. current market levels) and SBUX ($47.5 intrinsic) based on recent performance—may warrant accumulation. Conversely, positions trading near or above intrinsic value may warrant patience or smaller initial positions.
Dollar-cost averaging strategy: Given commodity price volatility affecting energy stocks, consider accumulating energy positions over 3-6 months rather than deploying capital in a single transaction. This approach reduces timing risk and captures potential price weakness.
Sector rotation timing: Energy stocks typically outperform during periods of rising commodity prices and economic strength. Monitor macroeconomic indicators—particularly interest rates, inflation, and GDP growth—to assess energy sector tailwinds. Fintech and consumer discretionary positions may perform better during periods of declining interest rates and strong consumer confidence.
Catalyst-driven entry: Monitor company-specific catalysts—such as major project completions (COP's Alaska LNG), operational turnarounds (SBUX), or geographic expansion (NU)—as potential entry points when market sentiment lags fundamental progress.
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FAQ Section
Q1: How were these stocks selected?
These 10 stocks were selected using ValueSense's proprietary intrinsic value analysis and machine learning-driven fundamental screening[1]. The selection criteria emphasize companies with solid free cash flow generation, reasonable debt levels, and trading at discounts to calculated intrinsic values. The portfolio spans energy, consumer discretionary, and financial services sectors to provide diversification across different economic cycles and growth profiles.
Q2: What's the best stock from this list?
Based on ValueSense's quality ratings and fundamental metrics, Nu Holdings (NU) stands out with the highest quality rating of 6.8, exceptional 35.8% ROIC, and 28.5% revenue growth. However, "best" depends on your investment objectives. For cash flow and dividend income, ConocoPhillips (COP) offers the highest FCF margin at 27.6%. For value opportunity, Starbucks (SBUX) trades at a significant discount to intrinsic value with a 6.2 quality rating. For cash generation, Shell (SHEL) leads with $25.9B in absolute free cash flow.
Q3: Should I buy all these stocks or diversify?
This depends on your portfolio size and risk tolerance. A concentrated approach (5-7 positions) allows deeper conviction and easier monitoring. A diversified approach (all 10 positions) reduces single-stock risk but requires larger capital allocation. Consider starting with 3-4 core positions in your highest-conviction stocks, then gradually adding positions as capital becomes available. The energy concentration (7 of 10 stocks) means you're already taking meaningful commodity price exposure—ensure this aligns with your risk tolerance.
Q4: What are the biggest risks with these picks?
Commodity price risk is the primary concern for energy stocks (XOM, CVX, SHEL, TTE, COP, PBR, BP), which collectively represent 70% of the portfolio. A sustained decline in oil or natural gas prices would pressure earnings and cash flow. Leverage risk affects several positions—Enbridge (159.1% debt-to-equity), TotalEnergies 53.9%, and BP 96.4%—limiting financial flexibility during downturns. Regulatory risk affects energy companies facing climate and environmental pressures. Consumer discretionary risk affects Starbucks, which faces labor cost inflation and competition. Emerging market risk affects Petrobras and Nu Holdings, exposed to Brazilian political and currency volatility.
Q5: When is the best time to invest in these stocks?
ValueSense's intrinsic value analysis provides a framework for disciplined timing. Stocks trading below intrinsic value (like COP and SBUX based on recent performance) represent better entry points than those trading at or above intrinsic value. Dollar-cost averaging over 3-6 months reduces timing risk, particularly for volatile energy stocks. Monitor macroeconomic indicators—rising interest rates typically pressure valuations, while declining rates support multiples. Sector-specific catalysts (major project completions, earnings surprises, regulatory changes) create tactical entry opportunities. Consider your investment time horizon: longer-term investors can tolerate near-term volatility, while shorter-term investors should wait for more favorable valuations.