Riding the Crude Wave: Should ExxonMobil Be Your Next Buy?
One way to get portfolio exposure to both fossil fuels and clean energy is by owning Exxon Mobil (NYSE:XOM) stock. To a certain extent, XOM’s success depends on the ups and downs of the petroleum industry. Not everyone wants to ride out the oil market’s waves, so consider the risks and potential rewards before investing in Exxon Mobil.
As we’ll discover, there’s been some insider share selling activity going on at Exxon Mobil. This might seem to clash with the company’s optimistic quarterly profit prediction. Ultimately, prospective investors will need to put the pieces of the puzzle together and determine whether a stake in Exxon Mobil is right for their portfolios.
Which Insiders Sold XOM Stock?
Here’s the lowdown. Reportedly, insiders at the company collectively sold a whopping $2.5 million worth of XOM stock during the past year. Among these insiders is Vice President, Principal Accounting Officer and Controller Leonard Fox, who sold $1.3 million worth of Exxon Mobil shares.
Furthermore, Exxon Mobil Vice President, Corporate Strategy and Planning Darrin Talley reportedly divested $173,000 worth of the company’s shares in the past year. So, are these signs that Exxon Mobil’s insiders believe the company is a sinking ship?
Not necessarily. A lot has occurred during the past year, including a substantial increase in the petroleum price. Possibly, some Exxon Mobil just engaged in some understandable profit taking. Or, maybe they have tax-related reasons for selling XOM stock.
What’s more important is whether an investment in Exxon Mobil is right for your overall strategy. For example, Exxon Mobil’s 3.14% forward annual dividend yield may entice income investors.
Value seekers might appreciate Exxon Mobil’s trailing 12-month price-to-earnings ratio of 8.57x, which appears to be quite reasonable.
High Fuel Prices Drive Windfall Profits
In contrast to the aforementioned insider selling activity, Exxon Mobil’s management seems to envision robust oil-driven profits.
Citing increases in oil, gas and fuel prices, Exxon Mobil (per Reuters) expects to record a third-quarter 2023 operating profit between $8.3 billion and $11.4 billion.
This optimistic outlook is understandable, considering the 30% increase in average crude oil prices during the third quarter. However, investors will have to wait until Oct. 27 to get Exxon Mobil’s full, final quarterly results.
Clearly, clean-energy initiatives are only part of the fiscal picture for Exxon Mobil. The company’s continued success will depend on Exxon Mobil’s financial interests in oil and gas properties.
Investors should be prepared for XOM stock to have some correlation, albeit not a perfect one, to the ups and downs of the oil price. Exxon Mobil’s third-quarter windfall profits might already be priced into the stock.
So, you probably don’t want to invest in Exxon Mobil if you think the oil price will decline sharply in the coming months.
Oil Bulls Might Consider XOM Stock
Sophisticated traders might use futures contracts to bet on the direction of the oil price. However, a (pardon the pun) crude way to get oil-industry exposure is through shares of Exxon Mobil.
There’s a lot to consider here. Some Exxon Mobil insiders sold numerous shares. On the other hand, Exxon Mobil’s management expect that Exxon Mobil earned windfall profits due to elevated fuel prices.
Ultimately, your outlook on oil and gas prices should inform your expectations for Exxon Mobil. All in all, XOM stock gets a “B” grade and, if you choose to hold some shares, be sure to keep a close watch on the commodities markets.
On the date of publication, Louis Navellier had a long position in XOM. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
