When I added ExxonMobil (XOM) to Jubak’s Picks on December 23, 2008, I thought it was a reasonable way to balance risk and reward. The stock was a good way to reach for some upside return in case the global economy—and oil prices—rebounded more quickly than I expected in 2009, while at the same time using ExxonMobil’s dividend to give me some protection against the risk that oil prices would tumble further.
For much of 2009 the stock lagged the market but I was content to collect my dividend while waiting for shares to get moving.
But recently ExxonMobil has also started to lag the rest of the energy sector. For example, the gain on ExxonMobil since my December 23 purchase until September 16 is a loss of 7.18% (excluding dividends). Devon Energy (DVN), a stock without the downside protection of an ExxonMobil, is up 14% in that period. Almost all of Devon Energy’s outperformance has come since August 1.
In my September 15 post, “Time to start planning for the next rally” http://jubakpicks.com/2009/09/15/time-to-start-planning-for-the-next-rally/ , I laid out the case for shifting some of your portfolio into the likely winners in the next stage of the rally. (There is likely to be a relatively mild 10% or so correction between this stage and the next.) One way to do that, I noted, was to shift from defensive energy plays to more offensive energy plays.
Today I’m exiting my position (also called “selling”) in ExxonMobil so I can redeploy (also called “buying”) that money into a more offensive-minded energy play. I’ll make that buy later this week. (Just to make it absolutely clear, I’m only selling ExxonMobil out of my 12-18 month Jubak’s Picks portfolio. It stays in the long-term Jubak Picks 50. This is a sell based on short-term market sentiment and doesn’t reflect any change in the company’s long-term fundamentals.)
Without dividends my loss on these shares of ExxonMobil since I added them to Jubak’s Picks is 7.18%. With dividends, the loss is 5.53%. (Full disclosure: I will sell my personal position in ExxonMobil three days after this post goes up.)
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