Buying XOM

by Dual Income No Kids on October 10, 2007 · 0 comments

So, I haven’t written about stocks very much over the past couple of months. This is largely because I haven’t had big blocks of cash coming in recently, but also because I’ve switched my stock investing strategy to emphasize trading less and buying and holding more.

But, over the past couple of months I’ve been able to scrape up a couple of hundred bucks in my IRA. After looking at some stocks we’ve bought before, AAV, HANS and XOM. I eventually decided on XOM.

AAV and HANS are both interesting investment opportunities. Hansens Natural Soda has a been a big winner for us in the past. We made about $30,000 on it last year. Advantage Energy (AAV) has an unbeatable yield (14.3%) and trades at an inexpensive 12 dollars a share. Hansens’ (HANS) net earnings were up 40% this year, but we’ve been stung by the stocks volatility in the past. So, while HANS and AAV are looking attractive, XOM is the winner for this go around.

For those of you who don’t know about XOM. In a nutshell, the Exxon Mobil corporation is one of the sires of Rockefeller’s old Standard Oil trust. Its a global multinational corporation that is primarily engaged with the exploration, production and distribution of oil and natural gas. The company’s profits are vast – 10.2 billion in the last quarter.

I like Exxon for several reasons.
First, its multinational. The fact that only 20-25% of XOM’s earnings come from the US means that its relatively immune to changes in currency and local economic conditions. This is important especially now that the dollar is so weak. Second, XOM has been a consistent earner for 30 years. You don’t see the kind of hyper-growth that you’d find in a fast moving tech stock, but XOM slowly and reliably earns 5 to 6 percent every quarter. This earnings growth is reflected in a steadily increasing stock price. Third, the company’s finances are in good shape. As of October 2007, XOM had a cash balance of $34.6 billion relative to debt of about $8.8 billion. This bodes well for the possibility of future dividend increases or share buybacks.

So, I’ll be putting a couple of hundred into the company as soon as sharebuilder executes my buy order.

Best,

James

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