This past weekend I came
across an article on Motley Fool titled,
Better Buy: ExxonMobil vs. Dow
I immediately thought
about the which one is the lesser of two evils…very similar when Hillary was
running against Trump a couple of years ago.
Nevertheless, I wanted to
get a tidbit from the article before I give you my opinion.
ExxonMobil (NYSE:XOM) is an old hand with a diversified business model. While the name Dow (NYSE:DOW) is old, it’s really a new company today, with a focus on the chemical space. Here’s a few things you need to think about to decide which one of these iconic names is a better fit for your portfolio.
Exxon is working through a difficult period for oil prices and spending heavily to improve its business. It has a rock-solid balance sheet and looks relatively cheap from a historical basis (the yield is higher than it has been in decades). It is hardly risk-free, but it has a long history of success behind it. Even conservative investors would be OK jumping aboard here.
Dow has a great name and solid businesses, but is really a new company today with a very limited history. Its balance sheet isn’t as strong as Exxon’s, but it also isn’t likely to face the same top- and bottom-line swings. That also suggests its target payout ratio is reasonable. However, with little track record, most investors would probably be better off giving the company at least a year or so to get its house in order before jumping on this high-yield stock.
Sector SPDR ETFs have become one of the most popular ways to invest in specific sectors of the stock market. Sector SPDRs track 11 different sectors in the S&P 500. It’s important to note that 39% of a stock’s move is due to the sector that it belongs to. The remaining balance is 41% of a stock’s move is due to the index and only 20% of a stock’s move is due to the company itself.
Since May I started tracking the SPDR sectors based on a moving average and a rating system I developed. It’s been fairly accurate in identifying the strongest and weakest sectors. Please note Exon belongs to the XLE sector and Dow belongs to the XLB sector.
Here are the results from
Here are the results from
wk of 5/13/19
As you can see, both companies have been in the worse sector five months ago and today. And when I look at the monthly chart for both companies, the chart suggests ExxonMobil will fall to the monthly demand at $68,
while the chart for DOW suggests price will fall to weekly demand at $42.
If I was Motley Fool, I would of probably titled the article, “Better Buy In the Future: ExxonMobil Or Dow” because neither one of them is worth buying at this point.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.
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