How These 4 Stocks Track Oil’s Low: Exxon Mobil Corporation (XOM), Halliburton Company (HAL), Chesapeake Energy Corporation (CHK)

3. Exxon Mobil Corporation (NYSE:XOM)

Correlation: .024

What Could Move the Stock

Because energy prices are sluggish and capital expenditures are high, Exxon Mobil Corporation (NYSE:XOM) incentivizes shareholders to hold its stock by paying a 2.5% dividend and by buying back shares.  In regard to share buybacks, I found an article from last May that explains Exxon Mobil Corporation (NYSE:XOM)’s share buybacks quite well:

Ten years ago, Exxon Mobil Corporation (NYSE:XOM)’s net income was around $4 billion. Today the company’s net income is near $10 billion. Without stock repurchases, we are looking at an earnings growth of 250% in 10 years, which translates into 25% per year (non-compounded, for sake of simplicity). This is not bad at all, however it gets better when we include stock repurchases into the calculation. Ten years ago, Exxon Mobil Corporation (NYSE:XOM) had 6.78 billion outstanding shares. Today it has 4.71 billion shares outstanding. This means that in the last decade, the number of XOM shares outstanding decreased by almost half. This means even if the company’s value were to remain flat, each share’s value would increase by 50%. If you divide a $400 billion company into 400 billion pieces, each piece is worth $1, but if you divide the same company into 200 billion pieces, each piece will be worth $2 instead. As a result, Exxon Mobil Corporation (NYSE:XOM)’s EPS grew from $1.68 to $8.28, an increase of 393%. This is obviously much better than 250%.

Halliburton Company (NYSE:HAL)

Correlation: .304

What Could Move the Stock

Since Halliburton Company (NYSE:HAL) is an oil-field service company, it largely moves in tandem with the general energy sector.  Notably, Halliburton Company (NYSE:HAL) does well when new wells are being drilled, because it can then sell more drilling equipment and can consult and help to set up the wells.

All Roads Lead Down

Into April I think that the market will hover around 1500 without displaying too much volatility.  However, oil could head lower.  And if a price correction for equities does come, then the ensuing “risk off” trade could depress oil prices even further.

The article How These 4 Stocks Track Oil’s Low originally appeared on and is written by Chris Marasco.

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