XOM Exxon Mobil Corporation

Exxon Mobil Corporation (XOM) — integrated energy as the structural inflation hedge. Target 2.0% (sector band caps energy; 3% trips the 1.6x-of-SPY limit).

What does the business actually do? Exxon Mobil Corporation is an integrated major — upstream production (now anchored by low-cost Permian and Guyana barrels), plus downstream refining and a chemicals arm that earns through the cycle when crude itself is soft. I underwrite it on mid-cycle economics and the distribution, not on the oil tape. Per the FY2025 10-K (period ended 2025-12-31): $28.8B net income, $6.70 diluted EPS, and — the number that matters — $52.0B of operating cash flow. Even with net income down YoY on softer crude, the cash engine threw off >$50B. Share count fell from 4.35B to 4.18B (~4% retired in a year): they are buying the float back while paying you.

Why now / fit to frame. This is the inflation hedge leg of Priya's late-cycle frame. The near-term tape softened — oil -4% on the month — and that is exactly why I want to start at 2% and not chase. Beta 0.18 (EODHD) makes it a genuine diversifier against a financials/tech-heavy index. Forward yield 2.84% with a 69% payout, covered comfortably by that $52B OCF.

Valuation. 24x trailing but 14x forward and ~10x EV/EBITDA (EODHD) — you are paid a real distribution to hold optionality on crude re-accelerating into a late-cycle inflation impulse.

How I'd know I'm wrong. Thesis breaks if mid-cycle free cash no longer covers the dividend + buyback — i.e., a sustained crude regime that pushes them to lever up to pay the distribution, or capital discipline slipping (Permian/Guyana cost creep). A structural demand-destruction story, not a quarter of weak crude, is the real risk. Price review at -20%; hard backstop at the committee's -2000bps line.