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Thread: XOM Thread

  1. #1
    Master Member vinayakm's Avatar

    Cool XOM Thread !!!

    One thing I am bullish about is XOM with its earnings release after the trading week ends on Friday. I am busy doing a net asset value (NAV) calculation prior to the big earnings release after trading closes Friday. I can then find the intrinsic value which I feel will confirm my intention to go in for monthly calls and maybe even weekly calls.

  2. #2
    Rookie Member
    Exxon Mobile for those who don’t know what is it XOM is in a big duel with the Apple for the title ‘The Biggest Company in the World’. Now the Exxon is second with 409B capitalization and Apple the first with 429B capitalization, but this will not last long as the Apple is in a downtrend now and Exxon is pretty stable. I am not a valuation specialist, but could say that the oil business is the one that will work for decades in the future, but Apple fan club could be not so loyal. So Call for XOM and Put for AAPL

  3. #3
    Senior Member LeeChang's Avatar
    The only way XOM could benefit is when the oil prices skyrocket, but dear friends this will not happen soon. A lot of new oil deposits and new technology for extracting it arise now and the supply will overcome the world demand in the next couple of years. The USA will no longer be an oil import country and will move to the category of exporters. The only way for hudge increase in the oil prices is a global economy recovery and again big numbers for the world grow, but this will not happen at least 2-3 years from now..

  4. #4
    Legendry Member Michael Hodges's Avatar
    XOM should do pretty well in the coming weeks. tHe price of oil is at multi month highs and this will transfer into bigger profits for the company. Plus, the global growth outlook is still expansionary, if muted, and this will also help. What we have to remember is that supply/demand issues are not met with newly discovered oil reserves, only by the actual amount of product. The oil industy as a whole has been lowering its output over the last year due to slowing conditions and that is evidenced in the rise of prices over the last few months. If we get a report stating that production is ramping up supply concerns could be alleviated but I haven't seen one yet. I will be looking into Exxons statements for just such a hint.

  5. #5
    Master Member vinayakm's Avatar

    Cool !!!

    I've done the NAV on XOM stock. I know that it has a lot of assumptions and several drawbacks. But the point is that the NAV is a major valuation metric for energy companies and this is especially relevant for upstream oil companies which XOM does a lot of even though it is an integrated major.


    XOM 2011 Annual Report

    So anyway, I did a conservative NAV estimate which gave me $66.40. The more optimistic one which should be more in line with reality since oil & natural gas reserves will only really start declining 50 years and a 100 years from now respectively despite what environmentalists have to say gave me an NAV per share of $82.14.

    Either way, XOM appears to be overvalued according to NAV.

    It seems like I can't attach Excel sheets for you to see the fruits of my labor. So, I will attach screenshots once I get them up on my blog.
    Last edited by vinayakm; 02-02-2013 at 07:41 PM.

  6. #6
    Master Member vinayakm's Avatar
    Here you go: take a look at the screenshots for the conservative and optimistic case in turn -

    Conservative
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    Optimistic

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    The optimistic case is what I would prefer and there are many reasons for this. We're talking about a big oil stock that has the highest ROAE and ROACE in the energy industry. Furthermore, it boasts of the highest financial margins in the oil industry.
    XOM is quick to point out that energy demands will continue to rise, but what we are concerned about here on BOTS is how will the stock do in the near term. Technical analysis has the answer and we see the MACD indicator pointing to a buy.

    Click image for larger version. 

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  7. #7
    Master Member vinayakm's Avatar
    Exxon Mobil is overvalued according to Net Asset Value, but we are only concerned with the here and now. Still, the reason why I wanted to discuss more about it here is because of it being the second most valuable company on Earth.

    It is also market with a short-term price target of $100ish by various analysts.

  8. #8
    Specialist Member LesterK's Avatar
    You have a great analysis vinayakm! I am really very impressed of your valuation capacity!!! It is a bit difficult to me to give you reasonable opinion about your analysis as I am not expert in this territory but for me in short term the biggest driver of the company earnings will be the oil price and it is climbing very fast in the last two months so I expect that it will affect the earnings report on the first quarter and will give additional fuel to the company valuation in short term. In long-term it is too complicated for me to predict and also it is not practical to trade, as long as we trade maximum monthly binary options and don’t have access to yearly options.

  9. #9
    Master Member vinayakm's Avatar
    Quote Originally Posted by LesterK View Post
    You have a great analysis vinayakm! I am really very impressed of your valuation capacity!!! It is a bit difficult to me to give you reasonable opinion about your analysis as I am not expert in this territory but for me in short term the biggest driver of the company earnings will be the oil price and it is climbing very fast in the last two months so I expect that it will affect the earnings report on the first quarter and will give additional fuel to the company valuation in short term. In long-term it is too complicated for me to predict and also it is not practical to trade, as long as we trade maximum monthly binary options and don’t have access to yearly options.
    Hi LesterK. Thanks for the kind words. I really appreciate it. I agree with everything that you've said. I couldn't have said it better myself. Even giant oil companies like Exxon Mobil have little control on the commodity prices (oil&gas in this case) and need to focus more on their production and reserves. Investing in an oil company is as good as betting on oil prices.

  10. #10
    Solid Member Peter Green's Avatar
    Good job vinayakm! There is really unposible for a single oil production comapny to control the market prices even if it is the biggest one, but if all the producers combine their efforts it could happen something bigger. I know that arab countries which are still one of the biggest players in the oil market decrease their production for the last several months and this could be one of the main reason behind the oil price increase. For hedging purposes it is better to bet on an oil company which is fair value according to the financial analisis and not directely on the oil price!

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