Exxon Mobil, Worth a Look?
It certainly presents an intriguing opportunity if nothing else...
My personal opinion is that the overall market is boarderline overvalued (SP500 @ ~1090). There are not the obvious buys out there anymore that there were back at the March 2009 lows. I miss those good ol' days, when you could blindly throw darts and score big. Honestly, practically free money. However, that is no longer the case. I feel we need a significant pullback and expect it to happen eventually; however, I have no idea when/if it will actually occur.
With this in mind, I have started looking in different areas for my investing plays. Trying to find "out of flavor" sectors/stocks and/or solid dividend paying blue chips (see here and here for previous ideas). My thought is that these will perform well over the long term (5-10 yrs.), and will also hold up well if we do experience a large correction (pretty please market gods?). So, why XOM you ask?
Big oil is evil, blah blah blah, they make too much money, blah blah, they pollute the environment and are in bed with the government! I'm not going to debate the particulars of these statements, but lets get on thing straight before people write this company off b/c of persoanl reasons.
Exxon is big oil and I'm sorry, but oil is here to stay for the foreseeeeeeable future. As much as I'd love to see other energy sources, we are no where even remotely close to having other viable options. We use oil in everything. Not just transportation, but oil is used in pratically every product we consumer (think plastic). It's here to stay. Some day we will weed ourselves from this addiction, but not before oil prices rise significantly and stay high for an extended period of time.
XOM is notorious for being a solid company with a solid balance sheet. Lots of cash and very little debt which reflects highly of management and if we learned anything last year. It was that having a clean balance sheet is key to surviving disastor. They did, and will continue to do so going forward. They have a solid history of paying out dividends and raising it about every year, and most importantly, they did not cut it during last years swan dive off the cliff. Currently the yield is ~2.6%, sweet!
Recently XOM acquired XTO in order to boost their natural gas exposure. XTO is one of the largest natural gas players in the US. This is obviously a bet the NG is where we are headed in the future. I don't see how this can't pay off in the end. Thge US not only has massive NG resources, but it is also cleaner. Which as you know, is currently the "it" word. There have been mixed opinions as to whether Exxon overpaid for XTO. This stock got hammered the week post this accusition anouncement, apparently many invesetors felt XOM bid too much as well. I believe the premium waas justified b/c of the huge potential income with an increase of NG prices (they have to climb, they are at historic lows).
The SP 500 has rallied like crazy since March. So has XOM, a crazy 5%! Yes, that is correct, it is 5% higher now than it was in March of 2009. Umm, what? Ya, my thoughts exactly. Even if we do have a significant pullback (we should) and even if oil prices go down near term (how they haven't already is beyond me, where is the demand??), XOM doesn't have that much to fall. There is practically no way the number one big oil company falls down for long. Eventually this will regain whatever downside it gives up in the near term.
Think about it, you're buying the biggest big oil at near their 52 week low (which occured when the world was ending!). This sector has almost every macrotrend solidly in it's favor right now. ie. a) oil prices will go higher and b) inflation. To top it off, they are going to pay you 2.6% to just sit back and hold it for 5+ years.
I'm not aiming for the moon with this, or trying to hit a homerun, just a steady income stream with a nice potential for appreciation as well. I'm not going "all in" with this play, but I need something to invest in! Dedicating a small portion of funds to XOM at these levels makes sense IMO.
So, who wants to sell their soul to the devil and buy some Exxon Mobil with me?
Comments, thoughts, and criticisms are welcmed and encouraged...