On average, going against the crowd is a bad move. There’s some truth to the saying… wisdom of the crowd. Although, that’s not always the case. And if you want to do better than average, you have to go against the crowd on occasion. So, that’s exactly what I did with oil stocks.
Back in February 2020, I bought shares of Exxon Mobil for $48.85. I invested a huge chunk of my hard-earned savings at that time. I bought 300 shares for $14,655. But alas, the timing wasn’t ideal. Then again, it rarely is…
Buying Exxon Mobil While It Crashed
In less than a month, I was down more than 30%. It wasn’t a great feeling to watch my portfolio… but my initial investment thesis hadn’t changed. So, I kept holding the beaten down oil stock.
It bounced around and by the end of the year, I wasn’t far from breakeven. I ended up sharing another video with the title, Should I Sell My Exxon Mobil Stock?
At the time, there were non-stop negative headlines for fossil fuels.
- Governments were putting new limits on exploration, production and transportation.
- Investment funds were divesting oil stocks.
- Oil demand (and prices) dropped as the pandemic halted travel around the world.
Travel has started to pick back up but some of the other negative pressures remain. Nonetheless, my initial thesis has started to play out. Even though I’m looking forward to a renewable energy future, fossil fuels will continue to be a major source of energy production for many decades.
Balancing Oil Supply and Demand
As a result, government restrictions – and underinvestment – have led to an oil supply shortage. That’s on top of global supply chain disruptions thanks to Russia’s recent actions.
This has all led to higher oil prices. And don’t forget government stimulus and currency inflation is playing its part as well. As a result, crude oil prices are near the highest levels we’ve seen in the past two decades. The cost of a barrel of oil recently topped $100.
Overall, it’s been a bumpy ride, but my shares of Exxon Mobil have climbed higher with oil prices. They’ve almost doubled from my entry point…
My initial $14,655 has climbed to over $28,000. That’s great to see that my contrarian play is working out. There’s even an ongoing joke in my full-time job – my blog and YouTube channel are just a side passion project. So, once again, I’d really appreciate it if you’d tap the like button on my YouTube video above, as well as subscribe. Some coworkers say that I’m an unethical investor for investing in oil stocks. It’s in jest – I think – but many people around the world fail to see that using fossil fuels is still a net benefit today.
Fossil Fuels are Still a Net Benefit Today
Many people talk a big game about switching to renewable energy… but reality is setting in. We still all benefit immensely from fossil fuels today. And of course, there are negative side effects we’re working to overcome – I’m optimistic in human innovation to overcome those issues – but once again, using fossil fuels is still a net benefit…
When looking at the energy data and trends, I realized renewables are still far off from overtaking fossil fuels.
It’s easy to tell others what to do but now fossil fuel restrictions and underinvestment are impacting everyone. And sentiment is starting to change again. We’re seeing higher prices at the pump and flight costs. But on top of that, higher fuel prices are helping push food prices to new highs as well.
There’s been a confluence of factors pushing oil stocks higher. That’s been great to see as an investor but now Exxon Mobil’s stock price relative to value doesn’t look as enticing. That’s why I’ve been considering selling it over the past month.
Selling Exxon Mobil Considerations
I’m more in the camp of Warren Buffett. I try buying companies with the goal of holding forever. That’s partially to avoid paying capital gain taxes. And continuing to hold and collect the dividends could be a good way to go. Although, the dividend yield has dropped as the price has climbed. And even though Exxon’s cashflows will be higher with oil prices, the valuation still looks less attractive today compared to when I bought shares.
On top of that, there are growing opportunity costs. As oil stocks have climbed, many others have dropped. And even though renewables are likely decades away from overtaking fossil fuels, it’ll eventually happen. This creates some very long-term uncertainty for oil companies… even as we’re seeing them try to position for that eventuality.
These are some of the main reasons I’m leaning towards selling my Exxon Mobil stock. I haven’t sold yet but if the price keeps climbing – outpacing fundamental growth – I plan to sell.
Do you think this move would make sense? I’d love to hear what you think in the comments below or in the comments on YouTube. I read every one and really appreciate your feedback. Here’s a past video on investing in Exxon Mobil as well. It gives some more insight into my investment thesis.
Thanks for stopping by and invest mindfully!