When I look at the numbers for Marathon Oil (NYSE: MRO), it is hard for me to believe the company has not been bought out already. Capitalized at $22 billion, it would be easy for most of the major oil companies to swallow whole.
Contrarian that I am, my view differs from that of Credit Suisse, which downgraded the stock yesterday based on valuation and lack of a visible catalyst for near-term growth.
I just can't take my eyes off the 0.27 price-to-sales ratio, 0.90 price-to-book ratio, 5.3 price-to-earnings ratio, with a relatively safe 3.1% dividend yield.
Seems to me that I would rather own a stock paying 3% than hold cash being rapidly diluted paying very little. For a catalyst not mentioned in the Credit Suisse press release, consider this: the value of your dollar will be going down in the future while the price of oil will be going up.
Marathon is just too cheap. It closed Monday, May 4, at $31.33. That's $1.33 above the Credit Suisse 12-month price target of $30. Try and figure that one out.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares of MRO.
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