Exxon as A Proxy?

“Davidson” submits

I do some individual work for domestic portfolios. My basis is first to identify good management cultures, then I analyze to understand the business dynamics and lastly I establish a valuation basis. Exxon (XOM) is an issue that meets the management culture criteria and today’s price of ~$65shr speaks volumes. By itself XOM could be a good addition to any conservative portfolio at the current level. But, more than that XOM can also be used as proxy for the oil sector and today’s level helps me to make decisions to buy any energy based company that has pulled back in the current environment.

XOM is particularly helpful as there is not a specific energy stock index that goes back as far as XOM’s history.

In the few accounts I manage, I am buying selected energy stocks.

Chart from 1964-Present (click to enlarge)

My two cents:

Exxon currently yields 2.6% and is trading 30% off its 2007-08 high on over $90 a share. Skeptics will point to the current administration and its less than friendly view of oil companies and impending taxation plans.

For some perspective we need only go back to the Clinton years to find a similar energy policy. During those years Exxon shares rose from $11 to $40. Not bad appreciation, excluding dividends… For those not wanting to do the math, that is 17.5% annual return (dividends excluded).

Disclosure (“none” means no position):none