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I’ve put a lot of thought into planning my personal finances, and you can gain the benefit of my insights through my posts here and on Thoughtsworththinking.net. Like most investors, I was shocked by the financial crisis that emerged in 2008, and I have found the impetuous and often... More
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  • Why Now is a Good Time To Buy ExxonMobil

    For investors looking to increase their holding in blue chip stocks, there’s a strong case that now is a good time to consider ExxonMobil (XOM).  As I’ve previously written, I believe that U.S. equities may face downward pressure following mid-term congressional elections as the debate about whether to extend federal unemployment benefits heats up with a rebalanced congress.  But Exxon is arguably less exposed to these risks than it’s peers on the Dow Jones Industrial Average (DJIA):

    • ExxonMobil lagged behind the Dow during the market’s explosive September, with the Dow rising 7.72% from August 31 through the September 30 market close (10,015 to 10,788).  In contrast, Exxon rose only 4.53% in the same period ($59.11 to $61.79), leaving fewer recent gains to wipe out when negative sentiment returns.
    • ExxonMobil is not BP (BP), and having learned from it’s own disaster with the Valdez spill in 1989 Exxon does not suffer from the credibility gap (not to mention massive claims liability) that BP faces.
    • While it’s reasonable expect that energy policy will be an important part of the U.S. agenda, increased Republican representation in Congress (and the gush of currently underemployed Republican lobbyists who will rush for opportunities to influence newly empowered Republican lawmakers) after the elections makes it unlikely that legislation will significantly undermine Exxon’sMobil’s ability to make a good profit.
    • While it’s hard to predict when, at some point the price of oil is likely to appreciate, either from a recovery in the U.S. or abroad, continued development in Asia, or a destabilizing political event.
    • As of the September 30 close, the stock pays a 2.85% dividend, further reducing downside risk and providing a good return while waiting for long-term appreciation to take form.
    It’s possible that movement towards U.S. energy legislation may create  future buying opportunities for Exxon.  But that does not refute arguments that the shares' current price levels are a good value.  


    Disclosure: Disclosure: The author is long on Exxon (XOM) as of the original publication date of this post. The author does not hold a securities position in British Petroleum (BP). The information provided in this post does not constitute professional investment advice, and should only be used in consonance with all available information, including the opinion of a professional adviser, to make an investment decision.
    Sep 30 7:47 AM | Link | Comment!
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