10 Reasons to Own Exxon at $68/Share

Aug.11.11 | About: Exxon Mobil (XOM)

Another day brought another huge market sell-off. I think most investors are getting tired of the whipsaw of the markets at this point. However, the pull back is creating some unbelievable bargains. One of these bargains is in one of only four companies that has a AAA rating: Exxon Mobil (NYSE:XOM).

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas, and manufacturing of petroleum products, as well as the transportation and sale of crude oil, natural gas, and petroleum products. The company manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and other specialty products. As of December 31, 2010, it operated 35,691 gross and 30,494 net operated wells.

10 Reasons you have to own Exxon at $68 a share:

  1. Exxon is selling within $5 of its low at the depths of financial crisis and bottom of the stock market selloff in March 2009 (see chart, click to enlarge):
    Click to enlarge

    Click to enlarge

  2. XOM is selling in the bottom quarter of its five year valuation range based on P/E, P/B and P/CF.
  3. Exxon has sold off around 20% in the past month and is now deep in bargain territory.
  4. Its triple AAA rated balance sheet is higher rated than the U.S. Government.
  5. It is yielding 2.7% and has grown dividends by over 8% annually over the past half decade.
  6. XOM is selling at less than 7 times operating cash flow. A very low level historically.
  7. Exxon is selling at 8 times this year’s expected earnings and is projected to produce $500B in revenues next year.
  8. Any “QE3” that occurs will likely inflate commodities just like QE2, which will be good for XOM’s stock price.
  9. Exxon is a low beta stock (.48) and is doing a better job than any other major in replacing production.
  10. XOM is way under analysts’ estimates at just $68 a share. S&P has a price target of $103 a share. Credit Suisse is at $95 and Jefferies is at $80 on Exxon.

Disclosure: I am long XOM.