For generations, income-focused investors have turned to Exxon Mobil (NYSE:XOM) not for quick profits, but for a steady rate of return. In most years, XOM stock has provided solid gains with relatively low beta, or volatility.
Of course, the stock gyrated during the onset of the Covid-19 pandemic, but so did most of the U.S. stock market. The omicron variant strain means that Covid-19 isn’t over yet, but Exxon Mobil’s investors have fared well over the past six months.
Lately, however, geopolitical events and a high inflation rate have thrown a wrench in the works. Investors might wonder: how will XOM stock perform amid a backdrop of fear and uncertainty in the market?
Fear not, as political events and global crises have come and gone, yet Exxon Mobil has stood the test of time. And while they are undoubtedly unsettling, geopolitical shocks could actually have a catalyzing effect the Exxon Mobil share price.
XOM Stock at a Glance
Is XOM stock a good value? Some skeptics might point out that the share price is closer to its 52-week high of around $83.08 than its 52-week low of $52.10.
Yet, the principle of momentum means that stocks in an uptrend can continue to move higher. Just because a stock has rallied, it doesn’t necessarily indicate that a pullback is “due.”
Value-focused investors can relax, as Exxon Mobil’s trailing-12-month price-to-earnings ratio is just 14.35. That’s quite reasonable, so there’s really no need to fret about XOM stock being overpriced.
What about income-seeking investors? You definitely aren’t being ignored, as Exxon Mobil pays out a forward annual dividend yield of 4.5%.
Finally, safety-minded traders can take comfort in XOM stock’s five-year monthly beta, which comes in at 1.17. This indicates that the stock only tends to move slightly faster than the S&P 500.
Gas Prices on an Uptrend
As you may have heard, U.S. lawmakers are scrambling to enact a gasoline-tax holiday. It’s a sure sign that petroleum prices are heating up nationwide. With the average U.S. gasoline price reaching $3.50 per gallon — that’s $1 more than a it was a year ago, according to the American Automobile Association — some Democratic lawmakers are reportedly seeking to suspend America’s federal gas tax.
It’s estimated that the current federal gas tax is around 18 cents. That might not sound like much, but for struggling Americans, paying the tax can be a big deal.
Evidently, some lawmakers are anticipating that gasoline prices will remain elevated, and might even go higher. Tensions in Russia, Ukraine and elsewhere could spur a ramp-up in petroleum prices in the coming weeks or even months.
What This Means for Exxon Mobil
While it’s true that Exxon Mobil is committing some of its resources toward clean-energy initiatives, let’s not forget that it’s still a fossil-fuel giant.
In a press release, Exxon Mobil reaffirmed its emission-reduction plans. However, the company also reported that its production volumes in Texas’s Permian region increased by around 100,000 oil-equivalent barrels per day last year. Therefore, Exxon Mobil could still benefit from high oil prices right now, and for years to come. After all, the shift to clean energy won’t happen overnight.
Furthermore, Exxon Mobil recently announced a new phase of petroleum-production activity in the offshore-Guyana region. So, there’s no denying that the company is still a major global oil driller.
Hence, as one expert strategist warns Americans of possible $6.50- or $7- per-gallon gas in the near future, Exxon Mobil’s investors can stay in the trade because the company could benefit the higher prices.
Geopolitical tensions and conflicts can put upward pressure on commodity prices. That’s not great for most Americans, but it shouldn’t be a problem for Exxon Mobil. Besides, it continues to offer a generous dividend yield and its shares are currently trading at a reasonable valuation.
These considerations add up to a powerful bullish thesis for XOM stock. It’s important to pay attention to geopolitical events, but if you’re an Exxon Mobil investor, you don’t have to let the news headlines shake you out of the trade.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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