Seeking Alpha
Research analyst, portfolio strategy, portfolio management, long/short equity
Profile| Send Message|
( followers)  

Our "Team Alpha" retirement portfolio is the primary focus of our series on a dividend growth retirement strategy. We have a very well balanced portfolio that we have been nurturing since last November. Today our focus will be on Exxon Mobil (NYSE:XOM).

Our most recent update can be reviewed in this article and as you can clearly see we have handily beaten the market averages and have crushed the S&P by roughly 14% over this period of time.

stock#Shares7-30 PPSTotValue
XOM10088/shr8800
JNJ10070/shr7000
T10037/shr3700
GE10021/shr2100
NLY11018/shr1980
BAC3007/shr2100
PG10065/shr6500
KO5080/shr4000
SO20049/shr9800
INTC20026/shr5200
O10042/shr4200
Cash Rsv0 68569
Totalxx123949

Since this update we have also added 100 shares of Wal-Mart (NYSE:WMT) as a new position. In addition, we added to our Annaly (NYSE:NLY) position with an additional 190 shares and Realty Income (NYSE:O) by 50 shares.

Our next trades will be the selling of options to grow our income and potentially add more shares to existing positions by selling puts.

Today's Focus Stock : Exxon Mobil (XOM)

XOM: Price: $88.44/share, Dividend Yield: 2.70%, ESS Rating: Bullish

  • A market cap of $409 billion makes it one of the 2 largest companies on earth
  • Revenue of $445 billion reflects an increase of nearly 10% YOY
  • Gross profit of $179 billion reflects an earnings increase YOY of an amazing 49%
  • It has a dividend payout ratio of only 21%, which could support a far more generous dividend, but also shows that they can maintain those dividends, as well as increase them, for over 50 consecutive years.

With a forward P/E of about 11, this enormous company seems undervalued right now. They are engaged in all aspects of the energy sector and have so much money as well as assets, that they can virtually do anything they want.

One of the recent moves that XOM has made, has been the business alignment with Rosneft, the Russian State oil company. This could potentially be the largest "find" in the entire Arctic Shelf, and could see production of a reported 85 BILLION barrels of oil by 2015.

As noted in this recent report;

"The Arctic has become the latest hotspot for energy development, as countries with an Arctic border have raced to the region to develop energy deposits. But exploration is technically challenging, and energy giants have been scrambling for the latest and most advanced technology to properly tap the deposits."

I can think of just a handful of companies in the sector that could actually handle this task, and Exxon Mobil is the biggest and the best. Once they have their rigs set up, that deposit of oil will be removed from the Earth, and Exxon Mobil will be the beneficiary, right on their bottom line, to the tune of billions upon billions of dollars in additional profits. Those added revenues and profits will dwarf whatever they currently have right now and the share price should reflect that.

The company also has an enormous footprint in all of the renewable energies available, especially natural gas. When the price of natural gas recovers, it will be difficult to calculate the added revenues and profits that XOM will enjoy. Suffice it to say that even with the downward pressure of nat gas pricing which impacted Exxon's earnings last quarter, XOM has still racked in amazing profits and one can only imagine what the future could hold.

As reported here, natural gas prices might have peaked this summer, however the nat gas futures price is still rising;

"Natural gas futures have increased about 55 percent since hitting a 10-year low in April because of hot summer weather. July was the hottest month on record, according to government scientists."

My Opinion

Based upon all of the fundamentals noted within, I believe XOM shares are undervalued by 20%. I am not sure how long it will take for the share price to reflect all of the positives that the company has going for it, but this stock should be a core holding in any portfolio.

Disclosure: I am long XOM, NLY, O, WMT.

Source: Team Alpha Retirement Portfolio: We Own Exxon Mobil And You Should Too