Face-Off on Stocks: Exxon Mobil, Chevron, Barrick Gold [Video]
Turmoil in the Middle East and North Africa has traders worried about disruptions to the global oil supply and geopolitical instability. That fear has oil prices flirting with $100 a barrel on the Comex division of the New York Mercantile Exchange (NYX), a level not seen in more than two-and-a-half years. Gold futures, meanwhile, are likewise back on an uptrend. The yellow metal, sought as a refuge against inflation and financial instability, are back near nominal all-time highs of around $1,430 an ounce in Comex trading.
Oil and gold stocks have caught a commensurate bid as violence has spread in Libya, Africa's third-largest oil producer, and could continue to gain as anxiety mounts that upheaval could spread to Algeria, Bahrain and Saudi Arabia. Whether the oil and gold trade is already played or oil and gold stocks still look attractive at current levels is a matter of debate.
Exxon Mobil (XOM), the integrated energy giant and component of the Dow Jones Industrial Average ($INDU), is as blue of a blue chip as they come. Shares are up more than 16% for the year-to-date vs. 4% for the S&P 500 ($INX) and have popped nearly 8% since the Libya crisis began.
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That run has the valuation looking a bit stretched. The stock currently trades at premiums to its own five-year average on both a trailing and forward earnings basis, according to data from Thomson Reuters. Of course if oil prices continue to rise, analysts' forward estimates will likely go higher, making the forward price/earnings (P/E) multiple look more compelling.
Chevron (CVX), the other integrated energy giant in the Dow, has also had a nice run. Shares are up more than 13% in 2011 and have jumped 11% since news from Libya caused oil prices to soar. Some analysts believe Chevron's superior upstream portfolio position and financial position warrant a modest premium for the stock.
Unfortunately, bears can say the stock may have already reached that modest premium on a relative valuation basis. Shares are currently trading at fair value to their own five-year average based on forward earnings and stand at a premium to trailing P/E. Of course bulls can point to a dividend that still yields a generous 2.8% as an indication the stock has hardly gone too high.
Barrick Gold Corp. (ABX), the world's largest gold miner, has seen its stock languish in 2011 as gold fever has been supplanted by a mania for silver and other metals, among other commodities. Shares were off as much as 13% by late January before gold prices rebounded. The stock has soared about 14% since then, putting it up about 2% for the year. With gold back at near-record levels, that run could continue apace.
More appealing is that shares still look like a bargain by relative valuation. The stock trades at a significant discount to its own five-year average on both a trailing and forward earnings basis, according to Thomson Reuters data. And then there's the dividend, which yields 0.9%. Dividends are one advantage of owning gold stocks rather than the metal itself. Gold, after all, offers no payouts.
For more on the bull and bear cases on Exxon Mobil, Chevron and Barrick Gold, see Face-off on Stocks above.
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