Exxon Mobil Corporation (XOM) trades below fair value while holding some of the best-quality assets among the oil and gas integrated companies, further standing out among peers through its skilled management team and capital-allocation strategy, says Christopher P. Bloomstran, President & Chief Investment Officer at Semper Augustus Investments Group LLC.
“We have a big position in ExxonMobil. We can own 15 different companies in the energy world, but with ExxonMobil we can own the very best assets in the oil patch, the very best management team, the best allocator of capital out there. I would rather own Exxon and their assets and their reserves than any combination of other majors, simply because they’re better, the capital structure is better, they’re better at capital allocation, they buy back shares when they are cheap not because Wall Street tells them that share repurchase is a good idea,” Bloomstran said.
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Bloomstran says he has realized significant profits from his ownership of XOM stocks, and the stock still trades inexpensively. He adds that the oil and gas company’s contrarian strategies have paid off.
“At times, they have gone against the industry in terms of exploration and production budgets. When oil prices were on the way up five years ago, the integrateds were all spending a lot of money on E&P, Exxon really cut back their budget and argued it was going to be cheaper to buy reserves at some point, and they were right. Most importantly, while we’ve made a lot of money on our Exxon position, the shares are still cheap relative to our appraisal of fair value,” Bloomstran said.