ExxonMobil Should Be Central to Portfolio Diversification
ExxonMobil (NYSE:XOM) is the definition of a blue-chip stock. Exxon, of course, is one of the most respected names in both big oil and big business. Exxon may also be described as the most successful enterprise ever built, as only General Electric (NYSE:GE) may rival the energy company in terms of longevity as a mega-cap firm. As an integrated oil company, Exxon explores, refines, and markets petrochemical products. The energy complex is not perfectly correlated to the world economy. In fact, Forbes contributor Robert Lenzner has recently argued that high oil prices triggered global recessions in 1973, 1980, 1991, 2001, and 2008.
Billionaire investor Warren Buffett may also agree that ExxonMobil shares would help shield a diversified portfolio against downside risks. As of December 31, Berkshire Hathaway listed out ownership of 41.1 million shares of ExxonMobil stock within Buffett’s annual letter to shareholders. For Berkshire Hathaway, its ExxonMobil position is now worth $4.2 billion.
The 1999 combination of Exxon and Mobil was an unmitigated coup. The deal, of course, burnished the legacy of oil man Lee Raymond and helped the former CEO earn every single penny of his $400 million retirement package. At the time, the industry was grappling with an oil glut and a near-term collapse in energy prices. In the following years, however, Exxon was to overtake both Wal-Mart and Microsoft as a political lightning rod for income inequality. The gaudy Exxon financials, however, are largely the result of the sheer size and efficiency of the company.
ExxonMobil stock closed out the July 3 trading session at $102.59 per share. At current levels, Wall Street traders have applied a $440.6 billion market capitalization price tag on Exxon. Be advised that ExxonMobil and Apple ($567 billion market capitalization) have largely been left to themselves to duel for the “world’s largest corporation” title for three years running. Last year, Exxon posted $37 billion in profits off $170.9 billion in 2013 sales.