Stoyan Bojinov: Commodities and equities started off the week in a hole as resurfacing Euro zone debt woes propelled the U.S. dollar in the currency markets. Gold is off to a choppy start as well; the precious metal has climbed higher on falling volume over the past three sessions, perhaps suggesting that traders are holding back ahead of Ben Bernanke’s testimony on Thursday. Today, the spotlight shifts onto the global energy bellwether, Exxon Mobil, and its 2011 year-end results [see also Iran Tensions And Crude Oil].
Earnings In Focus
Exxon Mobil Corporations (NYSE:XOM) posted its fourth-quarter 2011 results on Tuesday morning and the immediate reaction from investors was a sell-off despite surpassing most analysts’ expectations. In the meantime, crude oil took off and futures prices for the fossil fuel soared back above $100 a barrel. A closer look at the performance report reveals that business is stronger than ever; however, broad-based downward momentum across equity markets is hard to overcome for even the biggest of companies. [Related: U.S. Oil Fund (NYSEArca:USO), SPDR Select Sector Fund (NYSEArca:XLE)]
The oil juggernaut raked in profits of $9.4 billion in the fourth quarter of last year, marking a stable 2% increase from the same period in 2010. Year-end earnings painted an even rosier picture; full year earnings in 2011 totaled $41.1 billion, up an impressive 35% from 2010 [see Crude Oil Guide: Brent Vs. WTI: What’s The Difference?]. Chairman Rex W. Tillerson, commented, “ExxonMobil recorded strong results while investing at record levels to develop new supplies of energy that are critical to meeting growing world demand, and supporting economic recovery and growth”. The company attributed several factors to their performance, including: higher crude oil prices, increased natural gas realizations, and improved refining and chemical margins.
Ways To Play
Investors looking to focus in on the energy corner of the market have a variety of instruments available at their disposal. Aside from direct investment in shares of Exxon Mobil, some may wish to gain more direct exposure to the firm’s core operations; seasoned traders can opt for brent oil, WTI, and natural gas futures contracts [see Commodity HQ Trading Center].
Investors looking to utilize a diversified strategy for tapping into the energy sector may wish to consider a number of available exchange-traded products that allocate a significant portion of their assets to Exxon Mobil. There are currently three ETFs that allocate over 20% of their total assets to XOM. The iShare Dow Jones U.S. Energy Sector Fund (NYSEArca:IYE) has a hefty 26% allocation to the company, while the Vanguard Energy ETF (NYSEArca:VDE) and the FocusShares Morning Energy Index ETF (NYSEArca:FEG) allocate 25% and 21% respectively.
Written By Stoyan Bojinov From CommodityHQ Disclosure: No positions at time of writing.
CommodityHQ offers educational content, analysis, and commentary on global commodity markets. Whether you’re looking to speculate on a short-term jump in crude or establish a long-term allocation to natural resources, CommodityHQ has the information you need.