How Do XOM Shares Do It?

 | Jan 12, 2012 | 2:22 PM EST  | Comments
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Stock quotes in this article:

xom

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xto

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cvx

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cat

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mcd

Is ExxonMobil (XOM) being saved, for the moment, by the money coming into the S&P 500? Is that why this company -- which paid an arm and a leg to XTO (XTO) to beef up its nat-gas business at the absolute high -- is just a few points off its high despite Chevron's announcement? Is that why this huge market cap company is outperforming? It sure isn't because of its meager yield. It's not because of its extensive refining operation which I can't believe is doing much better than Chevron's (CVX).

Exxon's always been a company that seems to be blessed. It's as if they can do no wrong. They paid $41 billion for XTO, which is probably worth less than half of that just two years ago. They committed to natural gas but have stated publicly and emphatically they don't think it will be an important surface vehicle fuel, even though powerplant demand is NEVER going to take up the slack of a commodity trading at $2.71.

But the company keeps its halo.

I find this astounding to me. Overvalued. Lumbering. Certainly little to no growth.

That's why I am trying to suss out if it is just about the fact that it is so large and therefore is a huge beneficiary of S&P funding whether it deserves it or not.

I will give them this. They have a real buyback that has returned hundreds of millions of shares over the years. It does seem to actually support the stock.

But I will say this also. The XTO acquisition, in hindsight, might have been the dumbest purchase of the new millennium.

Random musings: Both Caterpillar (CAT) and McDonald's (MCD) trading over par. Bizarre that both companies doing well simultaneously, but both are executing perfectly.

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