Don’t Miss the Long Haul; Ignore Volatility: Suncor Energy Inc. (SU), Exxon Mobil Corporation (XOM), Phillips 66 (PSX)

Page 1 of 2

Investing is a stressful activity. Daily price changes and quarterly earnings give enough information and activity to keep you glued to your computer all day. The energy markets are constantly filled with surprises and the latest doomsday story.

Suncor Energy Inc. (USA) (NYSE:SU)The chart below shows two different measures of volatility; one for oil, and one for the S&P 500. There have been huge spikes in volatility, yet the broad stock market has kept on growing. Over the past five years, the S&P 500 total return index is up 27.09%. The world needs a consistent supply of energy. Focusing on strong and secure energy firms gives investors a steady flow of profits without the stress of the news cycle.

^SPXTR data by YCharts

Where to Invest

If you want to invest for the long haul, then you need a company that thinks the same way. Exxon Mobil Corporation (NYSE:XOM) is one of the most powerful integrated oil companies — and with good reason. The company has a number of upstream projects, including the Kearl project in Canada’s oil sands. Replacing reserves is not easy for companies of this size, and in 2012, overall upstream volumes did decrease by 5.9% relative to 2011. At the same time, downstream earnings helped to even things out and improved margins increased earnings by $2.6 billion.

A good mix of downstream and upstream assets is critical to maintain earnings in the midst of volatile commodity prices. Exxon Mobil Corporation (NYSE:XOM)’s diversity helps to allow you, the investor, to sleep sounder. The company has almost no debt, with a total debt-to-equity ratio of 0.07. Its yield of 2.5% isn’t very large, but with a 22% payout ratio, the company is trying to be prudent and save enough for capital investment. ExxonMobil is a solid company with decades of experience. For long-term investors, it is a great firm to consider buying.

Suncor Energy Inc. (USA) (NYSE:SU) is a Canadian firm that is heavily involved in the oil sands. Currently the fourth stage of their Firebag project in the oil sands is being developed, which should provide some of the volume to boost total upstream production from Suncor’s current 549,000 barrels of oil equivalent per day to the 570,000 BOE/D – 620,000 BOE/D goal in 2013. Suncor’s also involved with Exxon’s Hebron project off the coast of Newfoundland. The majority of firms in the oilsands are forced to take steep discounts because of the lack of transportation to get heavy oil to refineries. Suncor’s company’s mix of upstream and downstream assets help to get good prices for their heavy oil.

The firm has a healthy debt load with a total debt to equity ratio of .26. Their profit margin of 12.3% and gross margin of 53.4% give the firm room to breathe. Suncor isn’t as famous as Exxon, though it is still a good company with diversified operations.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!