Posts Tagged ‘xom’

  • Happy 125th Birthday, Dow Jones Industrial Average!
    , May 26th, 2021 at 9:01 am

    The Dow Jones Industrial Average (DJIA) was born 125 years ago on May 26, 1896. To give you an idea of how long the Dow has been around, its birth is closer to the Declaration of Independence than it is to today.

    The index was the brainchild of Charles Dow, who was the editor of the Wall Street Journal. When the index started, it only had 12 stocks. The list grew to 20 stocks in 1916, and it reached its present total of 30 stocks in 1928.

    The index has only changed 55 times over the last 124 years. In fact, the Dow has had two separate streaks of going 17 years without a single change — once from 1939 to 1956, and again from 1959 to 1976.

    Until recently, General Electric (GE) was the only one of the original 12 from 1896 left in the index, but GE was removed two years ago. A few stocks have been long-time members. ExxonMobil or Standard Oil of NJ (XOM) has been a member since 1928. Procter & Gamble (PG) joined in 1932. A few other stocks like Coca-Cola (KO) and International Business Machines (IBM) were taken out only to be put back in.

    The Dow’s history with IBM is a good investing lesson. The keepers of the index decided to kick out IBM in 1939 only to change their minds 40 years later and bring it back. Over those 40 years, shares of IBM soared 22,000%.

    Oops.

    If IBM had been in the index, the Dow would have broken 1,000 in 1961 instead of 1972. By my rough estimate, the index would be over 4,000 points higher today. If that wasn’t bad enough, the Dow was subsequently punished by IBM’s addition in 1979 as that marked a period of slow growth for the company.

    I can’t hide my feelings. I think the Dow is a lousy index. I rarely refer to it here on the blog. The reason is that it’s just 30 stocks and the index is weighted by price instead of by market value. Perhaps that made sense 80 years ago, but it’s not needed today. The only reason the Dow is still in the news is because the index is owned by the Wall Street Journal.

    Still, I have to give credit for Charles Dow for starting the index. Anything that’s still quoted 125 years later deserves a tip of my cap.

    Here’s to 125 more!

  • Warren Buffett Loads Up on DirecTV
    , February 15th, 2012 at 7:04 am

    In its latest regulatory filing, Berkshire Hathaway ($BRKA) detailed its portfolio changes. Since our strategy here isn’t too different from Buffett’s, we sometimes make similar moves. For example, Berkshire raised its stake in DirecTV ($DTV) by five-fold. On the other hand, they cut their stake in Johnson & Johnson ($JNJ). Interestingly, Buffett is now totally out of ExxonMobil ($XOM).

    It also bought about 1.7 million shares in Liberty Media, veteran dealmaker John Malone’s media venture which has stakes in everything from baseball teams and satellite radio to bookstores and cable networks.

    Berkshire’s quarter was also notable for a number of large moves. It raised its stake in at least five companies by more than 20 percent, including recent newcomers to the portfolio like Intel and General Dynamics. It also took a new stake in kidney dialysis provider DaVita.

    In contrast, it slashed portfolio stalwart Johnson & Johnson by 23 percent. Berkshire had been its fifth-largest shareholder, according to Thomson Reuters data. It also sold its entire position in oil major Exxon Mobil.

    DirecTV is due to report its earnings tomorrow. Wall Street expects 92 cents per share for the quarter and $4.38 per share for the year. If the yearly forecast is correct, that means DTV is growing at 29% while going for just over 10 times earnings.

  • Commodities Get Clobbered
    , May 12th, 2011 at 11:07 am

    Let me help explain what’s been going on in the market over the past few days. Now that earnings season is mostly over, there’s been a rush out of formerly hot commodities as investors have sought shelter in very low-risk bonds or in stocks in non-cyclical industries.

    To give you an example, the Silver ETF ($SLV) got as high as $48.35 two weeks ago. Today it’s been as low as $31.97. Ouch! The Gold ETF ($GLD) has backed off from $153.61 last Monday to $145 today. Oil ($USO) has dropped from $45.60 to $38.59. (Prices at the pump, however, are still high.)

    Now let’s check out what’s happening in the debt market: The yield on the one-year Treasury has dropped below 0.17%. Sure, it’s one thing for short term rates to be microscopic, but now we’re talking about one full year.

    Let’s take a step back and see what that means. One year at 0.17% works out to about 21 Dow points stretched out over a full year. Plus, that doesn’t include dividends. In other words, the Treasury investor would lose to the broad-based investor even if the Dow fell by (roughly) 1.8% over the next twelve months. So what is it that debt investors want so badly? The answer is security. They want it so badly, they’re willing to vastly overpay for it.

    I think that’s nuts, but there’s a buyer for every seller.

    On the stock front, the damage has mostly hit the commodity stocks. These are the stocks you find in the Energy ($XLE) and Materials ($XLB) sectors. The fall off in oil is really starting to hurt some of the major oil stocks. The market value of ExxonMobil ($XOM) has dropped by $40 billion this month. There are only a handful of companies in the world that are worth $40 billion.

    Energy and Materials stocks are the core of the cyclical side of the stock market. As I’ve been expecting, investors are rotating out of cyclical stocks and finding safe refuge in stable stocks. Cyclical stocks tend to lead the market on the way up, but they are punished more on the way down.

    Since our Buy List is focused away from cyclicals, we’re not down nearly as much as the rest of the market is. In fact, some of our stocks continue to rally. Jos. A. Bank ($JOSB), for example, is at another new high today. Sysco ($SYY) is also holding up well after its massive jump after the earnings report. Outside of our Buy List, defensive stocks like CVS ($CVS) and Southern Company ($SO) are at new 52-week highs.

    According to Bloomberg’s latest numbers, 72% of companies beat analysts’ estimates this earnings season. S&P has the S&P 500 on track to earn $22.58 for Q1. That’s a 16.51% increase over Q1 of 2010. It’s very likely that this current quarter will top the record earnings ($24.06) made in Q2 of 2007.

    For all of 2011, the S&P 500 is projected to earn $98.19. Going by yesterday’s close, the index is trading at 13.67 times this year’s forecast. That works out to an earnings yield of 7.32%. That’s about 400 basis points more than a 10-year Treasury. For next year, the S&P 500 is projected to earn $111.82.