Today I went long Exxon Mobil Corporation (XOM). I indicated in a prior article, I had no position. Since that article, I have traded Exxon Mobil long and short.
Exxon has performed poorly this year. On 2 January 2009, the stock was at 81.64, and today it closed at $66.55, down about 18.5%. Oil prices are about $67.22, which is a reasonable and healthy oil price for most integrated oil companies to perform well.
Please note that you can click through the above chart to see a full-sized chart and that the data for 17 August 2009 is not shown.
Of course, I am unsure whether today's market selloff is the beginning of a larger correction or simply random noise. I am less sanguine on the overall economy than most pundits and economists. However, with the Fed running its nuclear powered printing presses at full power, I am fearful of inflation and bullish on commodities. Time will tell if I jumped the gun today by getting long Exxon Mobil too early.
In this past weekend's lead story Quality Counts for Barron's (subscription might be required), Exxon Mobil is highlighted:
The oil giant is the industry's clear leader, with the highest returns, strongest balance sheet, best management and most stable earnings among the "super majors." Exxon shares normally command a sizable premium to those of such peers as Chevron, Royal Dutch Shell (RDS-A) and BP (BP), but that gap has shrunk this year as Exxon shares have fallen 14%.
Exxon doesn't look cheap, trading for 18 times projected 2009 profits of about $4 a share. The stock, however, looks more reasonable based on 2010 earnings. The consensus calls for $6 in earnings next year, but one energy maven tells Barron's that profits could hit $7 merely if futures-market expectations for energy prices pan out. A forward P/E of 10 isn't bad for one of the world's best-run big companies.
I had been thinking about going long Exxon Mobil, and today's broad market selloff seemed to be a good opportunity to establish a long position. Should Exxon Mobil go down further, I might increase my long position.
Disclosure: I am net long with respect to Exxon Mobil Corporation. I am long shares, long puts, and short puts.
I took the photograph titled Great Throw on 12 July 2009 when I went for a bike ride across Prince's Island in downtown Calgary. The young woman has a great arm for throwing amazing spirals. She is good at catching footballs too. If you click on the above photograph, you will taken to my picture at my Flickr account, where you can see more of my pictures.
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