Nancy Pelosi Says the Quiet Part Out Loud About 'Proving Innocence' at Trial
Fingerprints? Mug Shot? Here's What's Next for Trump After Indictment
Protect Wisconsin From the Radical Left
Left-Wing Violence Chic
From Stanford to Israel, Mobocracy Triumphs Over Deliberation
Biden Harms True Conservation by Misusing Antiquities Act
'No Coming Back From This Moment': Carlson Weighs in on Trump Indictment
The 'Professional Journalists' vs. Fox News
Will Republicans Find a Way to Get Their Way in 2024?
There Are No Banned Books
The Left’s “Get Trump” Obsession Now Threatens the Future of Our Country
It's Time To Put Away Our Phones
Will a Law Fix It
The Inconvenient Gun Deaths
Trump Family Reacts to Indictment: 'Communist-Level S**t'
OPINION

Ignoring the S&P Can Boost Profits

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

One of my readers asked me to comment about “where the S&P is going”.  

You know what?  It’s going to bounce around.

I guess the answer to that question is important if you buy index futures, but I buy stocks.

Market index trends don’t affect whether I buy stocks, because there are always good stocks to buy: profitable companies with good chart patterns.

But index trends affect which stocks I buy, which chart patterns I look for, and whether I’m going to hold the stock for two months or two years.

I recently gave readers a list of stocks that I was waiting to buy at lower prices.  The markets dipped this week, so I bought Microsoft, Intel and Target.  Kroger also reached my “buy” price, but I reconsidered on that one.  

There seemed to be more profit potential in the others.

I didn’t already own technology stocks, so my purchase of Microsoft and Intel didn’t overweight my portfolio–an important risk consideration. The only other industry where I own more than one stock is oilwell services & equipment. Curiously, I haven’t owned any oil companies all year.  None of them caught my eye.  Let’s review a few here.

Exxon Mobil Corporation (XOM, $78.86) is Big Oil with a global reach. They racked up $341 billion in 2010 sales, and $30 billion in 2010 profit.  Earnings per share (EPS) are projected to finish 2011 up 37.5%, which is an excellent increase, but then they flatten out to -2% and +5% in fiscal years 2012 and 2013.  The price earnings ratio (PE) is 9 and the dividend yield is 2.38%.

Exxon Mobil Corporation Stock Chart

Exxon Mobil Corporation Stock Chart by YCharts

Does that make Exxon a good investment?  Well, I wouldn’t embrace the flat projected earnings, but no doubt the PE and dividend are attractive from a “value stock” point of view. The thing is, I can buy companies with good earnings growth which fall in the “value stock” category, so there’s no motivation for me to buy a company which isn’t projecting consistent annual growth.

The projected earnings (EPS) patterns at Chevron Corporation (CVX) are similar: up a lot this year, then flat for two years. At BP PLC (BP) they’re even worse.

For now, I’ll skirt Big Oil and stick with oilwell services & equipment.

Readers should consult their investment and tax advisors to determine suitability, risk and taxation

Crista Huff, Goodfellow, LLC

Join the conversation as a VIP Member

Recommended

Trending on Townhall Video