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Exxon Mobil Far Outpacing Salesforce.Com Since It Was Removed From The Dow

Mar. 05, 2021 3:24 PM ETExxon Mobil Corporation (XOM)LCID, CRM, CVX, DIA, GDX, HON, RTX, SP500, SPGI, TLT, X, XLE, XLK, XME, XOP114 Comments


  • Exxon Mobil was removed from the Dow Jones Industrial Average on Monday, Aug. 31, 2020.
  • Salesforce.com replaced Exxon Mobil in the DJIA.
  • Since that date, Exxon Mobil has vastly outperformed Salesforce.com, with XOM shares rising 56.3%, and CRM shares declining 24.6%.
  • This performance is reflective of a broader market shift where economically-sensitive and inflationary assets are outperforming the disinflationary performance leaders of the past decade.
  • Many market participants have very little exposure to energy equities, as it's a very small part of the S&P 500 Index.  This fact is adding to the relative performance pendulum swings.
  • This idea was discussed in more depth with members of my private investing community, The Contrarian. Learn More »

If everybody indexed, the only word you could use is chaos, catastrophe… The markets would fail. - John Bogle, May 2017

A 60:40 allocation to passive long-only equities and bonds has been a great proposition for the last 35 years… We are profoundly worried that this could be a risky allocation over the next 10. - Sanford C. Bernstein & Company Analysts (January 2017)

Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. - Sir John Templeton



On Aug. 28, 2020, I wrote one of my favorite articles of the past several years, titled, "Exxon Mobil Exit From Dow Reveals S&P 500 Index Structural Flaws."

In the article, I described the background of S&P Global (SPGI) making the decision to remove Exxon Mobil (NYSE:XOM), the oldest member of the Dow Jones Industrial Average (DIA), from the index effective Aug. 31, 2020, and replacing XOM in the venerable index with Salesforce.com (CRM).

Part of the rationale for why S&P Global was removing Exxon on that specific date, meaning Aug. 31, 2020, was related to the Apple (AAPL) 4-1 stock split, that was effective the same day. This caught my eye, as I had flagged Apple shares as historically expensive earlier in August of 2020.

Ultimately effective Monday, Aug. 31, 2020, S&P Global added Salesfore.com to the DJIA, alongside Amgen (AMGN), and Honeywell International (HON), while removing Exxon Mobil, Pfizer (PFE), and Raytheon Technologies (RTX).

(Source: S&P Global)

While most investors applauded the removal of stodgy, seemingly non-ESG compliant Exxon Mobil from the Dow Jones Industrial Average, and cheered the addition of new economy stalwart Salesforce.com, Exxon Mobil shares have risen 56.3% since that infamous date, and Salesforce.com shares have fallen 24.6%.

Bigger picture, this relative and absolute outperformance of the old industrial

The Contrarian

There is historic opportunity in the investment markets today.  I have spent thousands of hours analyzing the markets, looking for the best opportunities, looking to replicate what I have been able to accomplish in the past.  From my perspective, the opportunities in targeted out-of-favor equities today are every bit as big as the best opportunities in early 2016, and late 2008/early 2009.  For further perspective on these opportunities, consider a membership to The Contrarian, sign up here to join.

This article was written by

KCI Research Ltd. profile picture
Founder of "The Contrarian", a premium research service, featuring a committed, collegial group that has uncovered a number of hidden gems, hidden in plain sight.  Immensely proud of what our members have accomplished.  Actively investing since 1995, I have soared like an eagle, and been unmercifully humbled by the markets. Achieved positive returns in 2008, and turned an account with $60,310 on 1/1/2009 into an account with $3,177,937 on 11/30/2009. My best years have been 1995-2003, 2008-2012, 2016, 2020, & 2021. My worst years were 2013-2015 & 2017-2019. I believe inflation is coming, and we are at an inflection point in the markets.

Twenty plus year career as an investment analyst, investor, portfolio manager, consultant, and writer. Founder of Koldus Contrarian Investments, Ltd, which was incorporated in the spring of 2009. Dyed in the wool contrarian investor, who has learned, the hard way, that a good contrarian is only contrarian 20% of the time, but being right at key inflection points is the key to meaningful wealth creation in the markets. I believe we are near a meaningful inflection point, perhaps the biggest one yet, for the third time in the past 15 years.

Historically, I have had huge wins and impressive losses based on a concentrated, contrarian strategy. Trying to keep the good while filtering out the bad.

Seeking to run an all weather portfolio with minimal volatility and index overlays to capture my strategic and tactical recommendations along with a concentrated best ideas portfolio, which is my bread and butter, but the volatility only makes it suitable for a small piece of an investor's overall portfolio. The following are a couple of my favorite investment quotes.

"Life and investing are long ballgames." Julian Robertson

"A diamond is a chunk of coal that is made good under pressure."

Henry Kissinger

"Knowledge is limited. Imagination encircles the world." Albert Einstein

I’ve been on top of the world, and the world has been on top of me. I have learned to enjoy the perspective from each view, and use opportunities to persistently acquire knowledge, and enjoy the company of those around me, especially loved ones, family, and friends.

At heart, I am a market historian with an unrivaled passion for the capital markets. I have had a long history and specialization with concentrated positions and options trading. Made money in 2008 with a net long portfolio, deploying capital in some of the market's darkest hours into long positions including purchases of American Express, Atlas Energy, Crosstex, First Industrial Real Estate, General Growth Properties, Genworth, Macquarie Infrastructure, Ruth Chris Steakhouse, and Vornado near their lows. Shorting, hedging, and option strategies also helped me in 2007 and 2009, and these are skills that I have developed ever since I started trading heavily in 1996.I enjoy reading, accumulating knowledge, and putting this knowledge to work in the active capital markets, learning lessons along the way.To this day, I continue to learn, and some of these learning lessons have been excruciatingly difficult ones, especially over the past several years, as I made mistakes allocating capital, including a sizable portion of my own capital (I always invest alongside my clients), to commodity related stocks. While all commodity related stocks have struggled since April of 2011, coal companies, which attracted me due to their extremely cheap valuations, and out-of-favor status (I am a strong believer in behavioral finance alongside fundamentals and technicals) have been the worst investing mistake of my career. The focus on the commodity arena has been the biggest mistake of my investment career thus far, yet in its aftermath, I see tremendous opportunity, even larger in scope than the fortuitous 2008/2009 environment.The capital that I accumulated and the confidence gained in navigating the treacherous investment waters of 2008 gave me the confidence to launch my own investment firm in the spring of 2009, right before the ultimate lows in the stock market. At the time I was working as a senior analyst at one of the largest RIA's in the country, and I felt strongly that the market environment was the best time since 1974/1975 to start an investment firm.

Prior to starting my firm, I was a senior analyst for three different firms over approximately 10 years (Charles Schwab, Redwood, Oxford), moving up in responsibility and scope at each stop along my journey. Since I was a paperboy, I have always had an interest in the investment markets. I love researching and finding opportunities. I was a Chartered Financial Analyst, CFA from 2006-2018. Additionally, I have been a Chartered Alternative Investment Analyst, CAIA. After starting in the teaching program at Ball State University, I switched to a career in finance when I turned a small student loan into a substantial amount of capital. I graduated summa cum laude with a degree in finance from Ball State.

Full disclosure, I am not currently a registered investment advisor, though I did serve in this capacity from 2009-2014, while owning Koldus Contrarian Investments, Ltd. Additionally, I held various securities licenses from 2000-2014 without a single formal complaint filed. At the end of 2014, I voluntarily let my state registration expire, as I transitioned the business to a different structure after going through a brutal business environment, divestiture and difficult divorce and custody battle. Prior to this, I had passed, and held, various securities exams and licenses, including the Series 7, Series 63, and Series 65 exams, in addition to others, alongside the CFA and CAIA designations. Unfortunately, I did not file the proper paperwork to withdraw my state registration, and I did not disclose a personal arrangement, and subsequent civil case, between myself and a former close personal friend and client. This arrangement was initiated informally in 2011, after a substantial period of success, as we aimed to be business partners, and it ultimately resulted in a dispute. I was unaware that I was required to disclose these items, and my securities attorney, at the time, did not advise me to do so. Previously, I had managed a portfolio for this gentleman, and we had taken an investment of approximately $7 million in 2009, and grown it to over $25 million at the beginning of 2012. After a very difficult year of performance, an employee of the firm I owned, and friend, resigned in early 2013, and took the aforementioned client to a competing firm. As a result of not filing the proper paperwork, I agreed to a settlement, with a potential $2500 fine in the future, depending on if I choose to reapply to be a non-exempt advisor. Additionally, while going through the difficult divorce and business dispute and divestiture, I did not file the proper disclosure on two of the annual CFA renewals. As a result, the CFA Institute sought a 3-Year Suspension of my right to use the CFA designation, which I appealed, since the primary investigator in the case sought a 1-year suspension of my right to use the CFA designation for a majority of the investigation. A Hearing Panel heard the case, and went against the recommendation of the CFA's Institute's Professional Conduct Department. Long story short, be careful who you trust, especially when substantial money is involved, and always disclose everything properly, which is hard to do when you are going through difficult situations, as this is the last thing you are probably thinking of at the time. In closing, I have had more experience in the markets, business, and life than most, yet I am grateful & thankful for every day. Additionally, I have learned through success and failures that you have to move forward, and if you can do this, your life will form a rich tapestry of stories.

Analyst’s Disclosure: I am/we are long XOM, CVX, X, AND SHORT SPY AND TLT IN A LONG/SHORT PORTFOLIO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Every investor's situation is different. Positions can change at any time without warning. Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (114)

Token White Guy profile picture
Energy from re-generating decomposing matter? Sound good to me!

Long XOM!
AEGISBMD profile picture
@Token White Guy

That's how Biden keeps going.
Apple Dan profile picture
Great call!
Wow, that would have been a fantastic pair trade. I like salesforce, but probably it was overpriced and long XOM short CRM was a great trade.
Long XOM
Joseph investing profile picture
I am a believer in the new energy bull market.

My doubt is staying invested for how long, to avoid jumping off too early.

My other doubt is more personal: wether to use even more leverage this week to buy more or to wait in case some correction is coming.
Will there be another chance to get in any time soon at 56 or 57 or has the train left the station on that?
@Proud Patriot , who knows. Buy a 1/5 position. If it goes lower, you average in and get a good price. If it goes higher you keep it small but will look at green.
Any practical advice on what to do if your invested in an S&P 500 index fund?
RoseNose profile picture
Enjoy your articles and not sure the reason for the performance of these 2 investments is because of the listings in the S&P, but that's okay, I like the thought.
Staying long XOM and CVX. They are performing well with help from the new Presidential edicts and it should continue. Hope it gets to RDS as well. All the love was gone, but is returning slowly, but surely. Thanks and Happy Investing :)) Rose
It appears oil services sector is a lot more depressed than the rest of the energy sector, plotting the ratio xes:xle you can readily see it is going up strongly. Consequently if I am to invest in energy shares right now it would be oil services.
At the same time midstream companies seem to be underperforming upstream, your take why?
@svetlanakhachaturyan1 Just wait till you learn about shipping.
@svetlanakhachaturyan1 , OIH historically is more volatile with more upside than XLE. I'm into it too. Let's hope it goes up as expected :-)
secorewb profile picture
If $87 price comes and yield is 4%, I am out of XOM. Have to remember why you invest and your sale tiles.
Incomeiam profile picture
@secorewb, I'm thinking of selling at 4.5% yield. It was a great buy when I bought at 8.5% yield but not so much at 4.4%.
soostefan profile picture
I see oil & gas as the best sector to which you could allocate capital over the next months. Over the last year 85-90% of my portfolio was concentrated in oil & gas companies and GameStop. After I sold my GameStop long position in shares in January (still short Apr and Jul 2021 PUTs) I have allocated even more to oil & gas.
Currently the largest positions are OAS, WLL, AR, SWN, EQT, RRC, ERF, AM, CHK, LPI. For OAS, WLL and CHK a significant part of the position comes from bonds converted to equity following chapter 11.
OAS, WLL and ERF are still few of the cheapest stocks from a valuation perspective and with low leverage and fcf yield above 15-20%. All 4 NG and NGL producers will deliver fcf yields above 10% in 2021 and will improve the leverage significantly.
Cuip99 profile picture
I sold my DIA before XOM was removed. I have not considered to repurchase it. I have bought more shares of XOM and continue to do so via DRIP. I am an investor, not a trader. Thus I can say I do not care what Salesforce does or does not do. It does not effect me at all. I sit back and collect a great dividend.
Scott Eranger profile picture
My only question is can one buy ExxonMobil now?

The oils have run so far, so fast.
@Scott Eranger , I think OIH has a bigger upside.
geologist profile picture
OK, Salesforce.com is a smoking hot Cloud stock for Jim Cramer. Cramer also doesn't like Exxon at all. You'd think he would mention Exxons 77% rise to $61 from its August 31st price of $39.50.

Or Exxons Oct 28th $31.5/share rise to March 5th $61/ share 94% rise. At least mention it.
@geologist , is Cramer any good? Why does he make a living like a TV clown? Did he get rich trading stocks or investing?
@Fero. I asked the same question. He built a great business and was successful in investing.
@geologist Never followed Cramer. Never will.
Migdriver75 profile picture
Really great article. Thank you !!
David-McCormick profile picture
EXCELLENT article. The "current keepers of the DOW" made a move based on "political rectitude" not economics in delisting XOM. It is not their first such move by "keepers of the Dow." If one looks at sales per employee, and other efficiency metrics XOM looks good within its industry group. I recognize the EV and GREEN crowd think they can bully everyone, but the simple fact is we live in an increasingly energy intense developed world. Those nations that hope to COMPETE will opt for "cost effective" energy sources, or perish. Petroleum and other carbon based fuels are often the most (1) reliable and (2) cost effective energy. Carbon is the fourth most common element in the universe. No expenditure on solar panels, windmills or batteries changes that. Lastly, for any rational investment time horizon, XOM will likely be a big player because its managers usually are better than other energy firms. Admittedly, some of the other oil majors (the competition ) have managements that seem to be as talented as those at the post office. Someday the age of oil will end, but most of its current detractors may not live that long. Does Salesforce has the potential to be the next MySpace or Commodore Computers ?
Montana13 profile picture
This author’s article which is link referenced made my year so far. Too, I knew a lot of XOM managers in Houston from back in the 70s and most of them are still communicating and in touch. The financial plan was always to wait this EV and pandemic out with low interest rates and less spending.
I went all in on XOM, CVX, RDSA, COP,and EOG, a true double down. Only RDSA has not performed quickly to large gains from what was a > 50% loss. I did receive some hefty dividends for the last year.
But this author’s article last year and the writings of DoctoRx allowed me to beat even some elite mutual funds performance.
My thanks to SA, KCI, and DoctoRx.
While index funds themselves are terrific, the underlying indices are not created equal. The S&P 500 is not what it used to be due to subtle, but important, changes to its inclusion methodologies, which overweight expensive equities, underweight value equities, and removed many of the "heavy lifters" like Shell, Unilever, and Nestle, from its list simply because they aren't HQ'd in the US. This is why I prefer total stock index funds, and index funds with an equal weighting approach. I loaded up on big oil and big tobacco last year, and mostly ignored the S&P500 as it was overpriced. Again, indexing is fantastic in a tax sheltered account, but beware certain underlying indices which have changed to require much more turnover and frictional costs compared to 20 years ago.
WW Burgess profile picture
@User 50479619 Great comment. An S&P 500 index fund is a wonderful tool, but far from the sort of investment end-all it's often made out to be.

In addition to the many incisive points you make, the tech-heavy S&P 500 is almost certain to significantly underperform international equities and other asset classes for years to come, and possibly the rest of the decade.

Significant asset rotation from big caps to Russell 2000 and international stocks began in October and is still playing out.

I missed the boat on tobacco (or is BTI still a buy?) but have been building positions in energy/oil since Fall 2019.
@WW Burgess thanks! I'm still buying BTI; will probably continue to purchase until $45; of course any rise in price requires a look at MO, IMBBY, and JAPAY to see where they are at, but for now, BTI is one heck of a deal for the long term investor.
Blackmolly profile picture
Like I posted here before, the removal of Exxon from the Dow marked a bottom. I'm up over 114k on my XOM shares. I think it can easily hit 70 before taking a breather.
Congrats on your success; I don't know but I think it will be higher than $70 depending how much the current prices of WTI and NG affect the top and bottom lines in the next few quarterly reports and when the dividend is increased by end of year; furthermore if CapEX are reduced more to improve cash flows ratios with respect to dividend distributions, that's more tailwinds....but yes there will be a breather eventually and for now it seems the old TIGER is running and roaring for more
FiXu Research profile picture
Your comparison starts when oil stocks were at all time lows and tech was at all time highs. Then you conveniently end your comparison when tech bottoms and oil surges. I read the title only and didn't bother to read the rest...
@FiXu Research , when tech bottoms, LOL. I think it will bottom a lot lower that it is now, but nobody knows when.
Apple Dan profile picture
@FiXu Research
If you didn't read the article don't make stupid comments.
His comparison starts at a time when he said XOM was going up and CRM was going down. Vindicated. And you are probably down on your tech names and missed out on the oil rally.
FiXu Research profile picture
@Apple Dan His comparision starts exactly where I said it starts. Don't make retarded comments if you can't grasp simple sentences. And oil rally? enjoy your 10% returns, you missed 200% tech rally.
I think Salesforce has a good future ahead of it. Eventually Salesforce will bottom out, and Exxon will top out. Then Salesforce will outperform again. (until the next rotation)
Good to see you finally vindicated in your forecasts. I like RSP much better than SPY. An equal weighted index is the solution to the problem. Or just buying all sector ETFs and always accumulating the cheapest one at the moment, whichever that one is. In a multi decade span that will prove a winning strategy.
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