Exxon reported nearly $12 billion in profits for the previous quarter recently. $12 billion! More net profits in one quarter, than ever recorded in the history of mankind.
And what did the stock do?
It went down.
Numbers like $12 billion generate emotional responses: anger, jealousy, envy, and even pride. The media does a good job of stirring the pot. Once the emotion subsides, a lot of people start to realize that Exxon is one of the largest employers in the United States, along with being one of the biggest taxpayers in the United States as well.
But there was something in the earnings report that really got my attention — maybe you saw it, too.
In addition to reporting record earnings, Exxon also reported their total production declined. Companies like Exxon simply don’t have the tools in place — or even available — to do more drilling or exploration. They simply don’t have the infrastructure to increase production.
Now let’s talk about their stock. And a short lesson in relative strength!
When compared to other oil stocks (Exxon’s peer group), Exxon stock has been on a relative strength sell signal since 2001. While this member of the Dow Jones has done well compared to the S&P 500 and the other Dow Jones stocks, Exxon appears to be a weak-kneed Willie getting sand kicked on it by some of the other bruisers in the sector.
And now that Exxon has broken the support line, and the sector is falling out of favor…well, it’s really starting to lead the parade out of town.
I suppose $12 billion just doesn’t get you what it used to anymore, does it? This company is posting record earnings, record revenues, record profits… and the stock goes down.
Oh…one more thing. Can you guess what stock you will find listed as the first or second largest position (investments) in most large-cap growth mutual funds? Here’s a hint…it used to be called Standard Oil.
Go ahead and read the headlines — just don’t base your entire investment decision on headlines… like most people do.