I don’t need to tell you that the rapid decline of oil prices (NYSEARCA:USO) has taken its toll on the market. The energy industry’s earnings have suffered, and many stocks have taken a beating.
But while many investors are staying away from the industry as a whole right now, I believe there actually may be an opportunity in one name that’s held out better than the rest.
Exxon Mobil Corporation (NYSE:XOM) is the largest publicly-traded energy company in the world. It produces oil and natural gas around the globe, using technology and innovation to meet growing energy needs.
Thanks to its size and diversification, Exxon stock has been able to weather the downturn in oil much better than the industry’s smaller companies. Exxon has been in a clear uptrend since January, and after bursting through previous resistance from November, was able to climb to a new 52-week high of $90 on May 10.
As you can see above, the Relative Strength Index (RSI) is now toying with a reading above 70, which has led many to question whether the stock is nearing overbought territory.
But as we’ve talked about before, a reading this high is not the be-all, end-all.
Exxon stock has easily outpaced the overall energy sector, with XOM up 15% so far this year compared to the Energy Select Sector SPDR (ETF)’s (NYSEARCA:XLE) gain of just 10%. And I think there may still be room to climb here.
Exxon Stock Can Hold Up Well
I’ll admit that I’m not a buyer with XOM shares trading so close to their highs, but given a pullback of a couple of percentage points, I think the potential reward would outweigh the risks.
Think of it this way: Oil has been rebounding recently, and should prices continue to rise, Exxon stock would reap the benefits. I have few doubts that it would continue hitting new highs.
On the other hand, if oil pulls back again, Exxon Mobil should still hold up much better than its peers thanks to its diversified portfolio of assets.
And there’s even a reward for simply hanging on to these shares. XOM boasts a solid 3.4% dividend yield — approximately twice that of the 10-year Treasury bond — so it’s a very attractive investment to investors in search of income while they wait for the longer-term rewards.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks, the ETF Bulletin and Co-Editor of Breakout Stocks.
