From Dan Ferris in the S&A Digest:
For the second quarter of 2010,
Extreme Value World Dominator pick ExxonMobil reported a 91% increase in earnings over last year's second quarter. Everyone complains ExxonMobil bought back stock and piled up cash for years and years and didn't build reserves. I recently showed my
Extreme Value subscribers why this viewpoint is incorrect.
You don't have to be a genius to know that ExxonMobil using its stock to buy XTO Energy's 45 trillion cubic feet of reserves for less than $1 per thousand cubic feet was a great idea. Poof! Everyone who said ExxonMobil wasn't growing reserves, or wasn't growing them fast enough, is proved instantly wrong, due to a single transaction... a transaction that made ExxonMobil the "mac daddy," low-cost, largest producer of natural gas in the United States.
What investors have failed to grasp is cash in ExxonMobil's hands is like cash in Warren Buffett's hands. Exxon is a brilliant capital allocator and a brilliant manager of its own capital structure. It knows what to do with the cash it generates. What's it doing now that the XTO deal is complete? Paying back XTO debt, of course. It just announced the repayment of another $2 billion in XTO bonds. ExxonMobil knows when to spend, when to refrain from spending, and how to keep itself in excellent financial condition. It refrained from spending during the boom years, buying back shares and building up cash. It bought XTO Energy with these shares after the crash.
I understand if you're bored by big-cap stocks like ExxonMobil. But I promise you that's a foolish viewpoint, since you're unlikely to make much money anywhere else for the next five to seven years...
Our World Dominator buy list, which includes ExxonMobil, is solely for subscribers to
Extreme Value. Four World Dominators are selling below their maximum buy prices today.
Crux Note: To access the full list of World Dominators along with weekly updates telling you which ones are in buying range, click
here.
More from Dan Ferris:
Dan Ferris: The only investment you never have to worry about
Dan Ferris: A one-of-a-kind farmland investment anyone can buy
"This could be the safest, cheapest stock in the world right now..."
