Global integrated energy giant Exxon Mobil (NYSE: XOM) was recently trading with a huge dividend yield of 5%, the highest it has had since the 1990s. Its ratio of price to tangible book value, meanwhile, is lower than it’s been since the late 1980s! Shares of one of the best-run oil majors in the world have been looking very cheap.
With a market value recently near $300 billion, Exxon Mobil is a giant, conservatively run ship that tends to turn slowly. But with little debt, it has the financial strength to take its time, and it could execute its growth plans even if oil prices were to fall.
And while Exxon Mobil is a little behind the curve on production (its production volume has been falling in recent years, while many peers have been expanding their output), it has big plans to fix the issue. Its efforts are already starting to produce results, via just one of several major growth projects. Those projects include oil development in Guyana and a comprehensive shale-drilling plan that involves retooling its massive refining and petrochemical manufacturing capacity in the United States to handle the unique chemistry of shale oil.
Exxon Mobil might not be firing on all cylinders, but it’s moving in the right direction. And the time to act is now, while investors are still reluctant to give the oil giant credit for its recent successes.
Ask the Fool
Q: How should I start investing in stocks, when I don’t have much money and don’t know much about investing? – T.M., Deerfield, Missouri
A: Don’t invest anything until you’ve learned enough to understand and be comfortable with what you’re doing.
Useful books that can help you understand the world of stocks and mutual funds include “The Little Book of Common Sense Investing” by John Bogle (Wiley, $25), “The Little Book That Still Beats the Market” by Joel Greenblatt (Wiley, $25) and “The Five Rules for Successful Stock Investing” by Pat Dorsey (Wiley, $25).
For starters, know that you don’t have to spend years becoming an expert stock picker. Instead, you might just park many or all of your stock market dollars in a low-fee, broad-market index mutual fund, such as one that tracks the S&P 500 index of major American companies. Such index funds outperform managed mutual funds, on average, over long periods, and can be great wealth builders.
Learn more about investing at Fool.com by clicking on the “How to Invest” tab.
Q: When I buy stock, is it OK – and safe – for the brokerage to keep the shares, or should I ask it to send me the stock certificates? – D.W., online
A: These days, it’s routine for brokerages to hold stock certificates for investors – registering the shares in “street name.” It’s actually helpful, because you don’t have to safeguard any certificates, and you can’t lose them. Also, whenever you want to sell, you don’t have to deliver the certificates back to the brokerage, which can take time. Instead, you can sell within minutes online, over the phone or at your local brokerage office.
My dumbest investment
My dumbest investment was buying stock in General Electric back in 2016. I’ve lost more than 70% of my investment thanks to that move. – M., online
The Fool responds: Your story offers a great illustration of some key investing concepts. For one thing, even the biggest, most illustrious names in business can fall on hard times and can turn out to be regrettable investments. Also, at any given time, one can make a bullish case and a bearish case for most stocks.
Three years ago, in the summer of 2016, bulls were optimistic about GE for reasons including these three: 1) It was planning to boost efficiency by connecting factories and their components to the internet. 2) It had bought the French energy giant Alstom for $10 billion, expecting to save money and drive growth in its energy business. 3) It was aiming to sell more high-margin services (such as cloud-based aviation equipment monitoring), along with many products, which could generate recurring revenue.
Bears, though, worried about sluggish overall growth, steep debt levels and analyst downgrades. Bulls and bears remain today: Bears are concerned about GE’s role in making 737 MAX engines, and even a fraud allegation; bulls point to asset sales that will pay down debt, the CEO buying $2 million worth of shares and early signs suggesting that a turnaround has begun. Investors need to dig in and make their own decisions regarding GE.
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