On Monday, the Dow Jones Industrial Average crossed into bear market territory, touching an intraday low of 29,161 -- 20% below the high it hit in late December. To put this event in context, the last time the Dow experienced a bona fide bear decline, the world was early in the throes of the COVID-19 pandemic.

Nor is the 30-stock Dow the only index that's down in the dumps right now. Across the much broader S&P 500 index, which tracks 500 of the biggest U.S. companies, the average price-to-earnings ratio currently is 18.4 -- a level that index last saw in 2014. And individual sectors of the stock market look even more attractive than that.

Take oil stocks, for example.

ExxonMobil, Chevron, and ConocoPhillips -- too cheap not to buy?

ExxonMobil (XOM 1.13%) -- the bellwether of the oil industry -- currently trades at a price-to-earnings ratio of just 9.3, while its only slightly smaller rival, Chevron (CVX 1.58%), trades at 9.4. And ConocoPhillips (COP 1.17%) -- half the market cap of Chevron -- seems a relative bargain at just 8.2 times earnings.

Not only that, but all three of them pay sizable dividends, adding an extra margin of safety for their investors. At its current price, ConocoPhillips, the stingiest of the bunch, still yields 1.9% -- 0.1% more than the average S&P 500 stock yields. Chevron, with a 3.9% dividend yield, is twice as generous.

And ExxonMobil? At its current share price, the dividend checks it's mailing out yield a fat 4.1%.

Why are oil stocks cheap?

"But wait!" you object. "Aren't oil profits artificially inflated right now by the war in Ukraine and sanctions on Russian exports?" Well yes, as a matter of fact, they are -- somewhat. But consider: According to data from OilPrice.com, the price of West Texas Intermediate crude -- the U.S. benchmark -- is currently just $77.65 a barrel. While that's more than oil has cost in the five years leading up to Russia's invasion, it's way down from the $120 and up that oil was selling for in the early weeks of the war.  

For that matter, while $77.65 a barrel is 50% more than oil cost five years ago, it's only about 5% more than oil cost four years ago. Because the truth of the matter is that oil prices go up and down all the time, and while there's certainly the potential for a recession to drag oil prices lower in the near future, already OPEC is making noises about cutting production to support prices. In the event a recession does happen, it's a safe bet we will see OPEC follow through on its plans to cut production, so as to not flood the market with so much oil as would drive prices significantly lower. 

All of which is to say: The cheap valuations we're seeing for ExxonMobil, Chevron, and ConocoPhillips today are not an illusion. They're not just going to disappear if you blink. Indeed, if you examine ExxonMobil's price-to-earnings ratios (for example) over the past 10 years, you'll see that the stock has generally traded for more than 22 earnings -- more than twice what it trades at now.

This may imply that investors anticipate declines in oil prices -- and oil profits -- in the years to come. Analysts are forecasting this, after all, predicting that Exxon's (for example) current $9.13 per share in trailing-12-month profits will dwindle to $7 per share by 2026. And the analysts may even be right about that, OPEC's best efforts notwithstanding.

But consider: Even a $7 per share profit for Exxon, at current share prices, implies a very-far-forward P/E ratio of 12.2 -- still nearly half the company's long-term average P/E ratio. 

What it means to investors

As Wall Street regularly reminds us, "past performance is no guarantee of future results." But to my mind, past performance is still the best guide we've got about what the future might look like. And if  ExxonMobil, Chevron, and ConocoPhillips return to their historical valuation levels relative to their earnings, investors could profit mightily from buying in at today's cheap stock prices.

It may take a while for the broader market to realize this. But if you're patient, and patiently cash your dividend checks while you wait, all three of these cheap oil stocks could reward you over the long term.