Lackluster news
While there has been some news about the company recently, it offers very little to engage the interest of potential shareholders. On April 10 Morgan Stanley reduced its rating for the company. Morgan Stanley gave Exxon Mobil Corporation (NYSE:XOM) an underweight rating down from its previous position as equal weight. Adding to this bad news, an Oppenheimer analyst also downgraded shares of Exxon Mobil Corporation (NYSE:XOM), saying that he thinks the oil and gas giant’s stock will trade in line with the S&P 500.
Meanwhile Chevron Corporation (NYSE:CVX) has been reaching new highs and providing a strong outlook. Chevron currently has an overall buy rating and is near a 5 year high while also yielding above 3%. At the same time, the company has a great dividend history, including “25 consecutive years of dividend increases.”
Looking at another competitor, ConocoPhillips (NYSE:COP) is also near a 52-week high, is yielding about 4.5%, and has a P/E under 10. Additionally, the company is currently working on increasing its reserves and production, and has a dividend history similar to Chevron.
Royal Dutch Shell currently has a dividend of over 5% and a P/E of under 8, making it perhaps the most attractive of the energy companies on the surface. However, it hasn’t seen the success of late of its competitors, and some of its recent acquisitions in Alaska appear puzzling.
Looking at the above, it appears that Chevron, Conoco, and Shell are all good potential investments. However, Chevron and Conoco are near 52-week highs and may have limited room to continue climbing. At the same time, many people are skeptical of Shell, and see other companies as more attractive. In the end, Exxon Mobil Corporation (NYSE:XOM) may be a great idea for people looking for a great investment right now.
Opinions from The Motley Fool are certainly promising. Writers Joel South and Taylor Muckerman explain Exxon’s acquisition of XTO Energy as a $40 million mistake and declare, “overpaying really hurts and when natural gas prices dropped it really has an effect on the company’s and shareholder’s value.” An uninspiring investment has become less inspiring.
A view from within
Given the poor outlook for Exxon Mobil Corporation (NYSE:XOM), why would anyone buy shares today? Furthermore who would buy shares? The answer to who is important because it gives potential investors a reason to take interest in a company that has little excitement to share: Exxon insider Patrick T. Mulva, who serves as the Vice President & Controller of the company.
As recently as March 13 2013, Mulva purchased 11,000 shares of Exxon Mobil Corporation (NYSE:XOM). 8,900 of these shares were purchased for $89 per share and the remaining 2,100 were purchased for $88.99 per share for a total cash outlay of $978,979. Some have attributed this insider transaction to growing expectations for natural gas given the company’s large exposure to the resource.
What is of greater interest is the disparity of Mr. Mulva’s share purchase price of $89 per share versus the $86.82 share price as of the writing of this article. Given Mr. Mulva’s extremely close association with the company, its balance sheets, cash positions and future prospects, we should pay special heed to this often overlooked clue.
Gaining insight from an insider transaction
The challenge remains inferring what Mr.Mulva’s actions say specifically about the company. His confidence in Exxon’s future seems clear, but as educated investors we should understand why he acquired the shares at the price he did and why now. Seeking Alpha’s April 11 story explains that Exxon Mobil Corporation (NYSE:XOM) and other oil companies “say they could spend $15 billion building a gas liquefaction plant on Russia’s Pacific coast in a move to jump start the country’s attempts to ship the fuel to Asian markets.”
The Wall Street Journal article that Seeking Alpha cites expands the picture by explaining,
“The plant could start shipping gas from 2018, Rosneft’s chief executive said, finally bringing significant sales of gas from one of the country’s first energy joint ventures, which Exxon first agreed to develop in 1996. The companies in February said they would study the feasibility of the plant, but Thursday’s comments provide the first indication of the scale and timing of their plan. The firms will decide whether to go ahead by June.”
Perhaps Mr. Mulva’s share purchases express his confidence in not only the plan but a decision to in fact move forward in June, a move that seems likely to help the company’s earnings in the long term.
By the numbers
Despite recent downgrades, Exxon Mobil Corporation (NYSE:XOM) continues to be an attractive option for investors interested in expanding a large-cap portfolio. Exxon’s gas liquefaction plant illustrates its forward-thinking approach to business. Mr. Mulva underscores this commitment to the future when he says, “at the base of all this is technology and we have dedicated a lot of money and a lot of time to technology, we’re a technology company.” However, it cannot be ignored that many of these points are part of a soft analysis of the company. The numbers present a more concrete outlook.
Exxon’s ROE and ROA still outpace the industry averages at 28.0 and 13.5 respectively. Additionally, the book value per share and dividend payments have increased nearly every year. Exxon Mobil Corporation (NYSE:XOM) shares have outperformed competitors like Shell and TOTAL S.A. (NYSE:TOT) in the last three months, although Shell yields over 5% and many believe it may be a good buy at current levels. The solid balance sheet also earned the trust of some of the largest asset managers in the world including the Vanguard Total International Index, the Vanguard Institutional Index and the SSgA S&P 500 Index.
As with any share purchase, the challenge is to balance an analysis of the numbers while pointing one ear to the market place and sifting out the telling whispers from the cacophony of media buzz and short-term hysteria. Mr. Mulva’s share purchase might just be that whisper.
The article One Reason to Be Excited About Exxon originally appeared on Fool.com.
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