Monday, December 27, 2010

Gas Pains (Exxon Mobil, XOM)

From the techniclish-momentous point of view, Exxon Mobil (XOM) doesn't look too bad at the moment. The stock price is up about 19% in the last three months, for a relative strength of 67% and steady, their MSN StockScouter Rating is 8/10, and their Motley Fool/MSN Caps Wisdom-of-Crowds/Self-Fulfilling-Prophecy Rating is 4/5. Standard and Poor's gives them five stars. Their trailing P/E, compared with their own last few years, is a little high, but not intolerable. Judging by past patterns, they should be increasing their dividend soon.


All of this is very nice, I suppose, but Warren Buffett says somewhere - What's an investment note without a reference to Warren Buffett? - that one is supposed to look at stock ownership as ownership in a company, and not as squiggles on a graph. And what has this company been doing lately? It's been buying companies which own natural gas rights right and left. (Or they have been buying companies which have natural gas left left and right.) Well, in case you haven't noticed, natural gas is really, really cheap at the moment, and some say that the price could easily start increasing in a year or so. (And I say: Never pay attention to anyone's prediction about any commodity price under any circumstances.) Jim Jubak suggests somewhere that the special talent of XOM's management is finding medium-term ways to make money out of the fossil fuel biz, if not directly out of fossil fuels, in all conditions.


Add to all of that the fact that human beings seem to be taking fossil fuels out of the ground a lot faster than the forces of nature are putting them back, and that the profits of the big oil companies have long shown a tendency to correlate with the price of oil, XOM might be worth buying right now. Or might not. And only as part of your regular program of dental hygiene, including regular professional care.

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