The Oracle of Omaha spoke with his wallet last quarter and took a $60 million stake in Exxon Mobil, likely at the expense of ConocoPhillips.
But wait. Isn’t Exxon generally regarded as the front runner in the industry, always at the top of its game? The company kept its No. 1 spot on Platt’s annual list of the top performing energy companies for the fifth year in a row, with a return on invested capital of 36.31 percent.
And doesn’t Buffett usually buy in at the bottom, when a stock is lagging and underappreciated?
Has the wizard lost his touch?
Hardly. This weekend Barron’s pointed out (via Reuters) what Buffett must have seen too: that Exxon has lagged behind its rivals this year but is in a much better position to capitalize on a rebound in energy prices”
“Shares in Exxon Mobil Corp (XOM.N), the world’s largest publicly traded oil company, could rise more than 20 percent to $90 next year if energy prices increase as expected, Barron’s reported on Sunday.
Exxon shares have lagged rivals in the stock market rally this year, falling about 10 percent, but futures contracts anticipate higher energy prices next year that would be a major boost to the company, according to Barron’s November 16 edition.
The Irving, Texas-based company could earn $6.50 a share in 2010 if the higher oil and natural-gas prices materialize, compared to its expected 2009 profit of $4 a share, the newspaper said. Exxon earned a record $8.69 a share in 2008 when oil prices peaked.
Analysts have criticized Exxon for weak production growth, but it has an impressive record for getting a high return on its investments, according to Barron’s. It replaced more than 100 percent of its production in each of the last 15 years and, between 2004 and 2008, its finding costs of $7 a barrel on average were below its peers, Barron’s said.
In addition, Exxon has a relatively low dividend yield of 2.3 percent, which is below several of its rivals, but analysts estimate the dividend could rise another 5 percent or more in 2010, Barron’s reported.”