With the markets in a choppy consolidation mode (or perhaps worse), the integrated oil sector has appeal as a defensive strategy.
Integrated oil and gas giant Exxon Mobil fits the bill, by virtue of its sheer exploration capability, assets, diversification, and managerial prowess. Each year, Wall Street analysts generate at least one research report on the 'fat' that must be cut from 'bloated' Exxon Mobil. Here's the incisive point that doesn't take an MBA from Harvard to discern: in a multinational corporation of that size, there's always going to be an amount of fat (unnecessary positions or operations) -- or at least an interpretation by someone in analytical circles that asserts that fat exists. Meanwhile, XOM, year-after-year, continues to be one of the best-managed companies in the integrated oil sector: upstream is solid, downstream is solid, and in 2007-2008 look for expanding margins in chemical operations.
The counter argument? The typical brickbats apply here, including a potential U.S. recession, breakthrough alternative fuel, or a seismic public policy action, but absent those, look for Exxon Mobil to produce impressive results. (Exxon Mobil reports quarterly results Nov. 1.) The Reuters 2007/2008 revenue consensus estimates are $424.1 billion to $427.7 billion. That 2008 revenue estimate may be somewhat low if crude oil remains higher than $85 per barrel. If crude oil remains hits $100 per barrel, on a longer-term journey to $120 per barrel, it won't take a chemical engineer to determine what will happen to Exxon Mobil's shares. XOM currently trades around $92.
[Note: Technical analysis agnostics stop reading here; all others continue.]
XOM's only breach of its 50-day moving average in the last 6 months occurred during the market's August 2007 sell-off. Otherwise, the XOM's chart is healthy.
Stock Analysis: Exxon Mobil is a low-risk stock. Investors seeking a modest-growth, dependable, integrated oil stock should consider buying Exxon's shares.
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Reader Comments (Page 1 of 1)
10-22-2007 @ 12:31PM
Cris said...
none at this time
11-02-2007 @ 12:23AM
Iris said...
What about today... Q3 losses! Do we bail or do we hold?