We recently published Jim Cramer’s Exclusive List: 10 Stocks to Monitor Closely. In this article, we are going to take a look at where Exxon Mobil Corporation (NYSE:XOM) stands against the other stocks Jim Cramer recommends to monitor closely.
On a recent episode of Mad Money, Jim Cramer emphasized the risks of straying too far from technology stocks, particularly the dominant tech companies, in today’s market. He pointed out how JP Morgan, despite being one of the best-performing banks, caused a stir by cutting its forecast, warning that estimates might be overly optimistic. This news hurt the broader market, dropping it by 93 points, although the S&P 500 saw a slight rise of 0.54%, and the tech-driven NASDAQ gained 0.84%.
“In this market, every time you stray too far from technology, especially the tech titans, you ultimately get slapped in the face by reality. That’s what happened today when the largest, and arguably best-performing, bank in the world, laid a huge egg with its forecast. They told us the estimates are too high, maybe way too high. That spoiled a big chunk of the market, ultimately dipping 93 points. The S&P inched up 0.54%, but the tech-heavy NASDAQ still gained 0.84%.”
Cramer explained that since the Federal Reserve gave positive signals, investors had shifted away from tech into other areas of the market. This shift was part of the “broadening out” that many investors had been waiting for, as it was believed to signal a healthier market. Financial stocks, which make up around 13.3% of the S&P 500, had been a source of excitement for those tired of relying on the leading tech stocks.
“For the past couple of months, ever since the Fed gave us the all-clear signal, we’ve seen money flow out of tech into long-neglected regions of the stock market. This is the fabled “broadening out” that people spent all year clamoring for. When we bring in more groups of winners, we’re supposed to have a much healthier market, at least that’s what they say. There are tons of financials in the S&P 500, about 13.3% of the index and the strength in those stocks was a source of much joy for everyone who had gotten sick of The Magnificent Seven.”
However, as Cramer noted, economic uncertainty and disappointing forecasts from bank companies disrupted this broader market strength. Daniel Pinto, the bank company’s COO, dashed hopes by signaling that the outlook for the bank wasn’t as strong as expected. The key issue was that net interest income, a critical measure for banks, was projected to miss expectations due to reduced capital market activity. For Cramer, this underperformance highlighted the danger of moving away from tech stocks too soon.
“But a funny thing happened on the way to that broadened-out market: we got economic choppiness. Or to use a more accurate phrase, we got guide-downs that were intolerable to any of the leaders, and the kiss of death to the stock of the bank. You can’t be a leader when you’re slashing your forecast for H2. That’s when the shareholders kick you to the curb and find someone new to follow.
But today, Daniel Pinto, the bank’s President and Chief Operating Officer, lowered the boom on the optimists who desperately wanted to buy something other than tech. The big bank told us that things are less bullish than we thought. There isn’t as much capital markets activity as we’d hoped this quarter, and most importantly, the estimates for next year are too high because of a likely miss on net interest income.”
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a major oil rig in the middle of the sea, pumping crude oil.
Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Investors: 92
Jim Cramer believes that Devon Energy (NYSE:DVN) is a more affordable option compared to Exxon Mobil Corporation (NYSE:XOM) and Chevron Corp. (NYSE:CVX). He finds Exxon Mobil Corporation (NYSE:XOM)’s dividend yield to be low, and Chevron Corp. (NYSE:CVX)’s is only slightly better. Cramer doesn’t consider this a favorable time to invest in oil companies, as demand has been weak and prices are declining.
“Devon is actually cheaper than Exxon Mobil Corporation. Exxon is expensive, with only a 3.4% yield. It’s not much better than Chevron, which yields 4.7%. It’s not a good time to own oil. Demand was never there, and prices are finally falling.”
The positive outlook for Exxon Mobil Corporation (NYSE:XOM) is based on its strong financial performance, strategic investments, and growth in production and low-carbon initiatives. In Q2 2024, Exxon Mobil Corporation (NYSE:XOM) earned $9.2 billion, or $2.14 per share, and generated $10.6 billion in cash flow from operations. It returned $9.5 billion to shareholders through dividends and share buybacks. Exxon Mobil Corporation (NYSE:XOM) also achieved a 15% increase in production, driven by record outputs from its Permian, Guyana, and Pioneer operations.
The acquisition of Pioneer Natural Resources (NYSE:PXD) further strengthens its position in high-return unconventional resources. Exxon Mobil Corporation (NYSE:XOM) is also making strides in the energy transition with investments in low-carbon technologies. Notable projects include a partnership with ADNOC to develop the world’s largest low-carbon hydrogen facility, and efforts in renewable energy storage and carbon capture.
Exxon Mobil Corporation (NYSE:XOM) is also expanding into innovative materials like Proxxima™ resin and carbon fiber applications. Bottomline, Exxon Mobil Corporation (NYSE:XOM)’s strong financials, growing production capabilities, and commitment to low-carbon solutions position it well for continued success and value creation in both traditional and emerging energy markets.
Overall XOM ranks 6th on our list of exclusive stocks Jim Cramer recommends to monitor closely. While we acknowledge the potential of XOM as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.