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Exxon Mobil: World’s Safest Investment

by: Kurt Wulff June 04, 2008 | about stocks: XOM    
Kurt Wulff

Kurt Wulff

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Arguably the world’s safest investment, buy-recommended Exxon Mobil Corporation (XOM) offers unlevered appreciation potential of 9% to estimated net present value [NPV] of $102 a share. First quarter results reported today met expectations for cash flow and earnings from three months ago although oil and gas revenues were higher than earlier indications.

Projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda). NPV is supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P).

By latest estimates, oil reserves are geographically diversified while natural gas reserves are showing new concentration in Qatar in the Middle East together with long-standing concentration in Europe. Oil price continues to trend upward.

We had thought that inflation-linked government securities were the safest investments to anchor a diversified portfolio, but lagging inflation adjustment and high taxation are driving us to believe that a proportionately large investment in the world’s leading corporation is “safer”.

Originally published on May 1, 2008.

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This article has 6 comments:

  •  
    Jun 04 08:50 AM
    The
    Stockaccumulator

    Good article, but a far better buy today would be PBR during this brief rare, mini-pullback in PBR...Read the below carefully researched article from "The street.com on Petroleo Brasileiro:

    " (PBR - Cramer's Take - Stockpickr) shareholders have earned a 172% return on their investment over the last 52 weeks.

    "If last week's positive earnings announcement is any indication, this Brazilian oil company has a lot more going for it than just good-looking charts (though the charts look good, too.)

    PetroBras Returns Continue to Beat Oil and Brazil Investment Benchmarks

    PetroBras boasts nearly a $300 billion market capitalization (its market cap just passed that of Microsoft(MSFT - Cramer's Take - Stockpickr)).

    In fact, it now claims to be the third-largest publicly traded company in the Americas, behind Exxon Mobil(XOM - Cramer's Take - Stockpickr) and General Electric(GE - Cramer's Take - Stockpickr).

    With a presence like that, it's clearly a bellwether stock both for the Latin American region and in the oil sector.

    PetroBras does a lot: It explores for and produces oil and natural gas. It sells surplus production in Brazil and foreign markets. PetroBras operates oil tankers, distribution pipelines, marine, river and lake terminals, thermal power plants, fertilizer plants and petrochemical units. It is also building new pipelines for ethanol distribution and recently set up a separate operation to manage all its ethanol activities.

    Here are three reasons I like PetroBras.

    1. The recent oil and gas announcements are real.

    In the last six months, PetroBras has discovered three super-giant oil fields in Brazil's offshore Santos Basin. The company also confirmed in January a major natural gas and condensate deposit in the Jupiter area.

    If estimates of 33 billion barrels in reserve from another field (Carioca-Sugar Loaf) prove correct, then this ranks as the third-largest oil field in the world after Saudi Arabia's Ghawar (66 billion barrels) and Kuwait's Greater Burgan (46 billion barrels). "

    Rudy Martin the writer ot this is the former director of research for TheStreet.com Ratings. Earlier he worked 25 years in investment research and management positions with Fidelity Investments, Lincoln National, Dean Witter Reynolds and Transamerica Investments. He began his career as a securities investment analyst at Duff and Phelps where he published equity and fixed income securities investment recommendations. Martin holds a master's degree in finance from Kellogg Northwestern University and is also a Chartered Life Underwriter. "

    It is expected that PBR will have a huge number for this coming quarter's earnings announcement very shortly. Never has there been such a huge expected net profit number from any oil company, and due to the April and May record price of crude. The graphs show the accumulation going into and through each earnings announcement to be far more impressive than any other large oil/gas company... One will have to take great risk with smaller similar companies... PBR will make you money next week/month, and expect $140 by next year this time for PBR... todays $68 is a brief temporary bargain... in a week or so PBR will be back to its all time high of $78... this is a rare opportunity... research it, look at the graphs... amazing for such a large well established company that is perhaps the microsoft of oil...

    I may buy 20,000 more shares of PBR today or early tommorrow...

    Warmest regards... the STOCK ACCUMULATOR
    Reply
  •  
    Jun 04 09:22 AM
    Love the stock and its competent management -the only caveat our trend towards socialism / marxism on Capitol Hill
    Reply
  •  
    Jun 04 10:38 AM
    I agree with the stockaccumulator in that PBR will offer a better nominal return over the long term. However, its risk profile is not even comparable to Exxon's. PBR can almost be considered a growth company, with its 113 billion $ capital expenditure budget by 2012. Exxon should ''only'' grow somewhere in the mid to high single digits for the next couple of years. Therefore, comparison between the two is not straightforward...

    Exxon is definitely a safer investment vehicle than PBR, but personally, I would own both, this way you get the best of both worlds: A strong value company in Exxon and a solid ''growth'' stock in Petrobras. They should actually be a nice complement in a diversified portfolio.
    Reply
  •  
    Jun 04 02:39 PM
    Petrobuz: I have followed this path PBR & XOM
    Reply
  •  
    Jun 05 07:19 PM
    Boring old,often criticized XOM is probably the place to keep some safe money.I always get concerned when everybody has the buzz about a company like PBR.Probably a place to put some for growth, but not the safe money haven like XOM.
    Reply
  •  
    Jun 16 11:05 PM
    The Stockaccumlator comment has been pasted verbatim into many, many of these comments...some kind of a shill for the company...
    Reply
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