Once the world’s most valuable company, Exxon Mobil (NYSE:XOM) has fallen from grace with investors over the course of the past decade, with fossil fuel producers losing their investment base as markets around the world choose Environmental, Social and Governance (ESG) investing strategies, avoiding new investment in companies like Exxon Mobil.
The oil sector as a whole has been in decline for the better part of the past decade, and without any real tailwinds on the horizon, some might be wondering how XOM could be a great investment.
The company has one of the highest dividend yields on the Dow Jones Industrial Index, in large part due to the decline in the company’s share price in recent years. For those investors who look at the “Dogs of the Dow” investing strategy, Exxon Mobil is a top pick, and has been for some time now (I’d recommend all investors look at this strategy).
Corresponding with a soaring yield, the inversely-related valuation of Exxon has dropped precipitously, with most of the company’s 30% decline over the past three years due to multiple contraction, as investors go elsewhere for large cap blue chip exposure.
Exxon’s stock price has been floating around $60 per share for some time, and while going long Exxon as a pure value investment could make sense for many deep value investors, I’d propose a long-short strategy for those seeking to amplify returns by taking advantage of exuberance in the ESG sector, for enterprising investors.
For those willing to bet that we’ll see a reversion to the mean in any sort of serious economic downturn, a long Exxon at this very low valuation and short Tesla Inc. (NASDAQ:TSLA) at its ridiculously high valuation, is a great value idea for the next 12 months.
Invest wisely, my friends.