Does one of the largest companies in the world belong in your portfolio? Consider ExxonMobil (NYSE: XOM), with a recent market value topping $400 billion.
ExxonMobil hasn’t been happy to see oil prices stagnate and even head lower recently. And it has not been ideally positioned, either, getting most of its production internationally while U.S. oil and gas production has skyrocketed.
Still, don’t count this longtime powerhouse out. ExxonMobil has remained an integrated oil company, so its refineries will be able to take advantage of growing spreads between domestic and foreign crude prices. It has also been investing large sums in big development projects that are likely to be productive for many years. It has become a bigger player in natural gas but hasn’t invested heavily in renewable energies.
In its third quarter, ExxonMobil’s revenue dipped 2.4 percent from year-ago levels and earnings dropped 18 percent. But gains in oil and natural-gas production reversed falling production levels from earlier in the year. It returned $5.8 billion to shareholders through a combination of share buybacks and dividend payments.
ExxonMobil recently yielded 2.6 percent, and it has been hiking its dividend by an annual average of 10 percent over the past five years. It offers great global diversification, too, with refineries in 32 nations.
Ask the Fool
Q: I see that General Motors just appointed Mary Barra as its new CEO. What other big companies have women in charge? – C.L., Baton Rouge, La.
A: There are 21 women running Fortune 500 companies – but 96 percent of the companies are still run by men. At least the numbers have been rising in recent years, up from just six in 2002.
Here are some CEOs to know: Virginia Rometty, IBM; Ursula Burns, Xerox; Marillyn Hewson, Lockheed Martin; Ellen Kullman, DuPont; Indra Nooyi, PepsiCo; Marissa Mayer, Yahoo!; Meg Whitman, Hewlett-Packard; Denise Morrison, Campbell Soup; Irene Rosenfeld, Mondelez International; Gracia Martore, Gannett; Patricia Woertz, Archer Daniels Midland; Carol Meyrowitz, The TJX Companies; and Phebe Novakovic, General Dynamics.
Any list of financially powerful women in the world would also feature, among others, Janet Yellen, nominated to head the Federal Reserve.
Q: How can I learn enough about an industry to become competent enough to invest in it? – U.R., Davenport, Iowa
A: First, understand that industries vary in their complexities, so some will be easier to understand (retailing, consumer products) than others (biotechnology, financial services). You’ll learn the most by reading broadly. Read many full annual reports of companies in the industry, including the comprehensive 10-K reports that detail each company’s successes, challenges and plans. Don’t worry if you don’t immediately understand it all – many concepts will sink in over time.
Your brokerage may have Wall Street analyst reports available for companies of interest, and you’ll likely find articles at Fool.com and elsewhere on companies you’re researching, too. If you’re serious about maximizing your investing skill, consider learning more about accounting, as that will help you make sense of financial statements, which is critical.
My Dumbest Investment
One of my dumbest investments was buying a penny stock for fractions of a cent per share, investing $600. It immediately plummeted to zero. It was a speculative play, and I ended up with a 100 percent loss. – B.W., New Hope, Pa.
The Fool responds: Lots of people lose lots of money on penny stocks. They get excited by the thought of owning thousands of shares for just hundreds of dollars. They don’t realize, though, that while a stock that costs, say, 6 cents per share might seem insanely cheap, it can still fall to 3 cents per share or lower, and there’s even a good chance that it will.
Penny stocks are often small, unproven companies with more promise than performance. They’re sometimes touted by hypesters via “pump and dump” schemes, where the hypesters buy shares, talk the stock up, and then sell for a profit as the stock crashes. Stick with healthy, growing companies – ideally, profitable ones. Speculation is dangerous. Try not to think of investments as “plays,” either, as it’s your precious, hard-earned money you’re trying to grow.