If there is one thing that can be said for Exxon Mobil (XOM) it's that when this slumbering giant moves, the markets move. Today oil prices have risen again to over $85.00 per barrel, and that simply means more profits for this company that already makes enormous profits year in and year out.
As I pointed out in this previous article, the drop recently in oil prices gave us a buying opportunity, and as of now it appears that oil prices are going to move back up. Things change so rapidly in today's global economy that it seems as though one day we are looking into an abyss, and the very next day our heads are in a cloud.
The thing is, that after analyzing the price movements of oil I have come to my own conclusion that no matter what the global economy does, oil is headed higher and so are the profits of Exxon Mobil.
Let's Check Out The Facts
Exxon Mobil: Price: $82.13/share, Dividend Yield: 2.85%, ESS Rating: Very Bullish
Ten days ago the share price closed at $77.60 at which time we added even more to our portfolio than we had when it fell to $81.00 dollars as mentioned in my previous article.
The price of the shares have pulled back from a 5 year high of $95.00 but has been rising in the face of a global meltdown and fears of a destabilized Europe as well as a weaker recovery here in the USA. How can that be?
It appears that the strings are pulled by so many forces that anytime the price of oil is not where some "forces" want them to be, then actions are either rumored to be imminent or actions are taken overnight.
Check out this article which discusses the rising prices of oil as OPEC "debates" production:
"The price of oil is rising as OPEC ministers debate how much oil to produce while the global economy is experiencing weaker growth.
Benchmark crude rose $1.21 to $83.84 per barrel Thursday in New York. Brent crude, which is used to price international varieties, gained 21 cents to $96.92 per barrel in London."
Notice that there has been no action, just talk, even during weaker than expected economic growth. Now this is nothing new, however we can profit by owning shares in the best of breed, largest blue chip energy monster on the planet as these gyrations occur.
Just the day before, there was this article which discussed the FALLING price of oil!
"What the heck is happening with oil prices?
West Texas Intermediate (WTI) oil is selling in the $82 ranger per barrel - way down from recent postings near $110. Overseas, the Brent price for oil is about $97 per barrel - way down from $125 per barrel as recently as early May.
What's going on? How low can oil prices go? Are we looking at the beginning of a major price slide? Is the oil and oil service investment space under a pricing assault?"
Two completely opposite reports, yet one thing has happened, Exxon Mobil share prices have risen.
Slowing growth, XOM drops in price (even though they still report enormous earnings) and slowing growth but cuts in production and XOM share prices can rise. Have a better economy with more demand, and guess what; share prices will still head up.
The bottom line is that no matter what happens, buying shares of XOM when they are on sale always seems to make us money in the longer term. Selling into sharp increases makes sense, but it is evident that hanging on, collecting the dividend and adding whenever the share price drops, makes even more sense in the long run and will certainly pay off for just about any investor.
We also have a dividend that approached 3% last week and this giant has an amazing track record of returning shareholder value as evidenced by checking out this site, which shows every quarterly payout since 1970 as well as a chart clearly showing dividend growth.
Let's also add in the recent price spikes in natural gas;
"Separately, natural gas prices jumped more than 10 percent after the government said supplies increased less than expected last week. It was the biggest gain for the fuel since late October." As reported in the previous Bloomberg article.
So what do we have; a perfect storm, or business as usual?
Exxon Mobil can do whatever it wants, whenever it wants and I have come to the conclusion that no matter what the global economy does, the share price will always reflect growth over the long run.
It is better to just buy this stock, especially now when prices are lower, and let it grow for you. I think we are headed back up over $90.00share, within 12 months.
That is what I am going to do, no matter what the global gyrations are from day to day.
Disclosure: I am long XOM.