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Sell ExxonMobil (XOM)

posted on September 16, 2009 at 1:30 pm
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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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  • terryw on 16 September 2009

    looking foward to the next pick! JoyG has been explosive lately. Great recommendation!

  • dot on 16 September 2009

    If I’m not mistaken, Jim, Xom is/was in your long-term portfolio, but your assessment doesn’t seem to jibe with a long term view. I’ve owned Xom since it merged with Mobil and got xom in exchange for my mob shares. The price has been going sideways at around $70 for some time now, so any price under that looks good to me. Last December’s price is comparatively high, so I can see why you want to sell it. But I wonder why this wasn’t in your 18 month portfolio. If I weren’t already fully invested in it, I would buy more. If it goes back down to $60 post rally, I might just buy more anyway. ExxonMobil is one of the best long term buys out there.

  • Jim Jubak on 16 September 2009

    XOM is in my 12-18 month Jubak’s Picks portfolio as well as in my long-term Jubak Picks 50. I’m selling it out of the 12-18 month portfolio but leaving it in the long-trm portfolio. Sorry for any confusion.

  • dot on 16 September 2009

    Ah… I didn’t spend enough time looking through the short term portfoliio. Thanks! That clears that up.

  • SPDTANIA on 16 September 2009

    What are you planning to buy instead of XOM? I read your other article where you compared PBR vs. STO. But what are you recommending in the energy space? Oil exploration?

  • Beabaggage on 17 September 2009

    My Canroys have run up a lot, w move in CN $, PWE and its div have been great even after the tax, some of which you get back and all the SIFT nonsense Harper shoved on the poor CN retirees on the Trusts. PVX also long, has paid down debt and just sold some assets and paying down more, more speculative. Long both.

  • Jim Jubak on 17 September 2009

    Pick later this week. Although on today’s news on the huge Anadarko find off Sierra Leone. I’d certainly be recommending RIG and other deep water drillers if I didn’t already own RIG in the Picks portfolio. Looks like we’ve got another major offshore field opening up. Potentially immense since it stretches at least from Ghana to Sierra Leone (about 600 miles) and no one knows how far out into the Atlantic. I’ve seen projections that it could reach as far as Guyana in South Ameriica. With existing discoveries in the deep Gulf of Mexico, and in the South Atlantic off Brazil, it’s hard to see day rates for offshore rigs headed anywhere but up.

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