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Analysts: Buffett likes Exxon, but that doesn't mean everyone should

  • “When Warren Buffett gives his seal of approval to any company, that is never a bad thing,” so Exxon Mobil (XOM +1.8%) powers within reach of its 52-week high after Berkshire Hathaway added a 40M-share position.
  • But Buffett's style of value investing may not work so well for the rest of us, even for those looking for a big defensive energy stock; Brian Youngberg of Edward Jones prefers Chevron (CVX +0.2%), which he says is more attractively priced relative to XOM, offers a higher dividend yield, is more profitable per barrel, and has better potential for production volume growth.
  • Buffett's underpinning thesis for XOM purchase looks similar to his 2011 IBM purchase - difficulty growing revenues but returning a significant amount of cash to shareholders - but investors who blindly followed Buffett into Big Blue in 2011 have significantly underperformed.
Comments (29)
  • Brian Bobbitt
    , contributor
    Comments (1888) | Send Message
     
    NO ONE's style of investments or investing is good for you. You MUST develop your own strategy and discipline. Hardest thing to do is follow your own advise, and easiest way to lose is to follow the herd.
    Plot your own course, never let go of the wheel, and don't leave the pilot house. As soon as you do, it will be another Exxon Valdez.
    Capt. Brian
    The Lost Navigator
    Cut the losers, ride the winners. Find a way.
    15 Nov 2013, 02:27 PM Reply Like
  • smurf
    , contributor
    Comments (3777) | Send Message
     
    Cap'n, where you been? Been looking all over SA for your pithy (yes, pithy) comments.
    15 Nov 2013, 02:42 PM Reply Like
  • Veritas1010
    , contributor
    Comments (1309) | Send Message
     
    Captain:

     

    I've never had the pleasure of speaking to you directly. However, I have always respected your commentary.

     

    Good to see you back on board sir.
    15 Nov 2013, 07:56 PM Reply Like
  • combatcorpsmanVN
    , contributor
    Comments (653) | Send Message
     
    Wow!! Incredibly presumptuous and pompous to conclude that investors necessarily follow WEB into investments Blindly.
    15 Nov 2013, 02:28 PM Reply Like
  • LMTlighting
    , contributor
    Comments (12) | Send Message
     
    No it isn't. Buffett's a financial celebrity. People will let their judgement be swayed easily by the like of Buffet, Cramer and the like.
    15 Nov 2013, 10:50 PM Reply Like
  • Elevator Music
    , contributor
    Comments (28) | Send Message
     
    I like the logic though. I would never follow it professionally but I like it. These people think if their investment doesn't perform well, then folk like Buffett are losing a million times as much. And with investments of this size retail investors automatically assume intense research and carefulness goes into every purchase.

     

    I'm not necessarily disputing that. But what if people like Buffett can be content with modest returns and gigantic quarterly dividend payments, or even market underperformance? What if at their level of capital they start becoming focused on safety, low beta and liquidity rather than exponential growth?

     

    These are real issues and obstacles to a retail investor who will need a lifetime to build a portfolio worth even one hundredth of what Buffett earns in a single quarter off his dividends.

     

    You can't blindly mimic Soros or Buffett. You don't have their capital. Actually, most people are playing with 5 figure portfolios they don't even actively manage; The average IRA account is worth a bit over $80k. In terms of portfolio wealth this is an obscurely minuscule amount.

     

    With such low portfolio values investors should do everything in their power to maximize their growth. It doesn't have to be diversion into riskier companies, but you shouldn't always pick the least risky option if your portfolio is practically worth nothing at the moment. Investors with bankrolls comparable to Buffett become more concerned with wealth management. Retail investors don't really have any mentionable wealth to manage; They are mostly people building assets for retirement. They're trying to *create* that wealth they might one day have to manage.

     

    Until that day comes, it seems absurd to follow blindly the investments of big ticket investors who already put their growth days behind them decades ago and just want some stable income without depreciation.
    16 Nov 2013, 09:40 AM Reply Like
  • sarichter
    , contributor
    Comments (273) | Send Message
     
    After the exuberance dies down... XOM shares should drop down again and you can buy at a more reasonable price. I'd have to agree though that Chevron is a better deal if anyone is looking for integrated oil. However, I haven't invested any time in researching their business model.
    15 Nov 2013, 04:03 PM Reply Like
  • ystock15
    , contributor
    Comments (169) | Send Message
     
    Yes, everyone should. And I don't get it what the freak the article saying about Buffet's 2011 IBM investment failed? (or whoever followed him into it). In Jan, 2011, IBM started around $150 ish, and ended that year with $180. That's a freaking +20% return and hardly a failure, of course a A+++ freaking FANTASTIC ACHIEVEMENT!! So yes I believe everyone should have XOM why? Simple, it's one of the largest cap in the world and you can't go wrong with it for the long term investment. I've been into XOM only one and 1/2 month and 8%+ return already. That's great for such a large corp can still grow at this rate. Who knows how high it might go up as it already broke the record highest stock price ever in history
    15 Nov 2013, 04:26 PM Reply Like
  • Veritas1010
    , contributor
    Comments (1309) | Send Message
     
    True. But why now?
    15 Nov 2013, 07:57 PM Reply Like
  • Rootarmo
    , contributor
    Comments (177) | Send Message
     
    IBM performed great for a while but this year its not doing as well. Had I purchased IBM and the S&P index at the same time in January 2011. The holder in the S&P would be about 20% ahead in gains realtie IBM. (not counting dividend reinvestment).
    16 Nov 2013, 08:01 AM Reply Like
  • Phenom1
    , contributor
    Comments (236) | Send Message
     
    I agree that everyone has to plot their own course, but those who make judgements about XOM v. CVX based on the last five years are looking in the rear-view mirror.Watch Capex & FCF. Going forward, XOM wins IMHO.
    15 Nov 2013, 04:33 PM Reply Like
  • Veritas1010
    , contributor
    Comments (1309) | Send Message
     
    Wash, rinse and repeat.

     

    We all know who XOM is and as prudent investors probably have a solid chunk in our dividend producing portfolios, but it still begs the obvious, why now?

     

    disc: Long XOM, just wouldn't be adding now. Why?
    15 Nov 2013, 08:01 PM Reply Like
  • JMajoris
    , contributor
    Comments (637) | Send Message
     
    Warren's a master at creating synergy between companies. I wonder how this will benefit NOV and BNSF?
    15 Nov 2013, 04:54 PM Reply Like
  • whiff
    , contributor
    Comments (636) | Send Message
     
    We will find out for sure in 5 years...
    15 Nov 2013, 05:15 PM Reply Like
  • sl100
    , contributor
    Comments (110) | Send Message
     
    at $95 and 420B Mkt currently and declining oil and gas prices not a good entry point. For long term investors i think around 80-85 (WB price level) may be ok but there better stocks to buy then XOM. Just because Buffet bought at a lower price does not make sense to buy at these levels. Also Exxon has not acquired resources and it is getting expensive for them to do so because china and India are competing for the same resources(until the mid 2000's they have very little competition to acquired resources but now it a different. I am a bit surprised Buffet actual bought XOM although at much lower price
    15 Nov 2013, 06:17 PM Reply Like
  • Veritas1010
    , contributor
    Comments (1309) | Send Message
     
    sl100, I agree totally. Thank you for the commentary.
    15 Nov 2013, 08:03 PM Reply Like
  • Hungry for Knowledge
    , contributor
    Comments (345) | Send Message
     
    Two words: natural gas.
    That's why.
    Sloooowly moving up in price.
    Exxon is the largest producer.
    It's the only game left in town for growth, and it will grow massively.
    Large integrateds can read the writing on the wall, and the oil reserves they seek ain't there. Tied up by country's oil ministries, and China.
    Very long XOM.
    15 Nov 2013, 08:31 PM Reply Like
  • Skippy09
    , contributor
    Comments (1436) | Send Message
     
    I was going to comment on why I'm long XOM but Hungry f K said it all. I think Buffet got it right. I sold my CHK when my XOM purchased NG assets.
    15 Nov 2013, 08:54 PM Reply Like
  • sl100
    , contributor
    Comments (110) | Send Message
     
    Natgas with fracking technology this has created a huge inventory and production coming online do not see how one can justify buying at 95. Wait for the dip no point chasing it at 95 around85 is better bet.
    15 Nov 2013, 11:52 PM Reply Like
  • sheldond
    , contributor
    Comments (1021) | Send Message
     
    Nice point....and that answers it.
    16 Nov 2013, 12:20 PM Reply Like
  • JosephCam82
    , contributor
    Comments (11) | Send Message
     
    COP was pretty good for Buffet, regardless of the much rememberred mea culpa, probably returning him 13-15% per yr including appreciation, dividends, and the PSX spin-off.He probably sees that tailing off to 8-10% in the future although COP has done very well in reserve replacement, best of all majors. XOM's reserve replacement has been slightly better than CVX's. I think XOM has more options on how to use its resources though, and covers the gamut. Of course it's not just RR but also efficient utilization of them. Probably CVX and XOM are not that different at that. If Buffet felt he had to sell out part of his COP stake, I think his choice of XOM was slightly better than picking CVX. For the small fry like myself, I like OXY and BP better on the short term and all three (COP, XOM, CVX) on the long term.
    15 Nov 2013, 11:32 PM Reply Like
  • David Pinsen
    , contributor
    Comments (1048) | Send Message
     
    I recently read Steve Coll's book about Exxon. Even though it was written with something of a left-slant, one thing that came across about XOM is how disciplined, prudent, and well-managed the company has been over the last couple of decades. A number of examples come to mind, such as the company's fanatical emphasis on safety following the Valdez disaster, its prescience in turning down Bush Administration requests to take on too visible a role too early in occupied Iraq, and its resistance to getting sucked into mission creep non oil-related development projects Africa.

     

    XOM is a great company. Whether this is a great entry point is another question. For those who are already long the stock, though, and are interested in adding downside protection, it's at least fairly inexpensive to do so now ( http://bit.ly/HY8GTb ).
    16 Nov 2013, 01:05 AM Reply Like
  • Kyle Spencer
    , contributor
    Comments (998) | Send Message
     
    " -- but investors who blindly followed Buffett into Big Blue in 2011 have significantly underperformed."

     

    Never judge the viability of a long-term investment within a 24 month time horizon. Anyway, doesn't the performance question depend, even for short term investors/speculators, on whether or not one sold in 2012?
    16 Nov 2013, 05:07 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11014) | Send Message
     
    Exxon and others are itching to export natural gas, oil, and everything else overseas. I expect their push to export which will drive gas prices back up to pass in the next few years and may be a primary reason Buffett invested since he's playing government insider games these days rather than fundamentals.
    16 Nov 2013, 11:12 PM Reply Like
  • XOM4ever
    , contributor
    Comments (3) | Send Message
     
    As a long time Exxonmobil employee I can most readily affirm our relentless focus on safety as well as ROCE. Best in the business. Growing upstream projects in Africa. Watch and learn! Been long Xom 35 years and don't know how I will spend it all....
    17 Nov 2013, 12:55 AM Reply Like
  • 61rookie
    , contributor
    Comments (20) | Send Message
     
    To Xom4ever
    Will the next 5 years earnings wise be better than the last 35 ? I think Mr.Buffetts purchase is a free long call on natural gas.
    21 Nov 2013, 10:06 PM Reply Like
  • Phenom1
    , contributor
    Comments (236) | Send Message
     
    Interesting way to view it, 61. I agree.
    22 Nov 2013, 10:47 AM Reply Like
  • XOM4ever
    , contributor
    Comments (3) | Send Message
     
    XOM is looking forward with nat gas with their recent XTO acquisition. We do need to get some export licenses going to take advantage of the price differentials around the world. As far as transportation fuel goes who will blink first will be interesting to see. Does XOM as the supplier begin building out refueling stations or do the car manufacturers start building nat gas cars without nat gas stations first?
    24 Nov 2013, 04:47 AM Reply Like
  • XOM4ever
    , contributor
    Comments (3) | Send Message
     
    Guys,I agree nat gas is coming but until we develop the refueling stations oil will continue to be the transportation fuel of choice. Who blinks first to begin installing the nat gas fueling stations, suppliers ( xoms of the world) or the truck and car makers? Also as a huge supplier of petro chemicals the onslaught of new natural gas coming on line should bode well for lower cost inputs for chemicals going forward.
    24 Nov 2013, 04:48 AM Reply Like
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