Without question Marathon Oil (NYSE:MRO) has taken a beating. MRO stock is off 44% year over year.
Just a few weeks ago … no, a few months ago … no, a few years ago — anyway, since Joe Biden’s other running mate was in the White House — investing in petroleum stocks seemed about as smart as shooting off fireworks at an oil rig. The sector has slumped like a depressed dinosaur.
But with under-the-radar stealth, MRO stock is mounting a … comeback? No marathon is this (petro-pun intended), but rather a mini-sprint. Since Nov. 1, it’s up 70% and trades at $7 a share. What gives?
Well, those impending zillions of novel coronavirus vaccine bottles might as well contain Texas crude. Pandemic-weary investors are convinced energy stocks will roar back as motorists return to the road, and Marathon is more than ready for the ride.
Another group of shareholders — those I dismissively and deliciously call the Robinhood lemmings — also played a role in jump-starting MRO stock.
Just 10,000 Robinhood users held MRO in the first week of March; by mid-August, the numbers had spiraled upwards of 187,000. What were they trying to do, other than prove how “smart” they were backing a company that couldn’t turn a profit? Or did/do they know something that this investment grease monkey does not?
Trying to Unlock MRO Stock
Marathon still fails to pump out profit today. While electric car startups can get away with that, the companies that fuel old-school vehicles can’t. Irrational exuberance from the Robinhood crowd only gets you so many miles to the gallon. Thus I’m curious as to what case might convince me to buy MRO stock.
It helps to start with someone smarter than me — which I’ll admit is pretty easy to do — and so I turn to the analysts. Well, now I feel better: They don’t seem to know what to make of MRO stock either. Seven call it a buy. Three call it a sell. A whopping 17 sit right on the fence. This somehow adds up to a hold consensus, but a mighty odd one it is. Maybe a dozen more call it a “hell if I know.”
At least some clarity emerges when you consider forecasts for the next two quarters. Analysts predict MRO stock will report losses of 23 cents and 21 cents a share respectively. I have reason to believe they’ll nail it, as MRO stock has pretty much met Wall Street expectations for at least four consecutive quarters.
Drilling Down the Dry Well
But to get the true picture on MRO stock, you have to look miles backward and not inches forward. Now, let’s climb to the top of the derrick and take in the whole landscape.
Uh oh. Not a gusher in sight. In fact, anyone who got in on the ground floor with MRO stock in 1991, and is still sticking it out, will lament that they should’ve cashed out in 2007 or 2014.
In both those years, shares hit $40. But at today’s price, 30 years of dedication to MRO stock would’ve netted you … a loss of 20%.
Yes, the pandemic gets blamed for a lot these days. And within the petroleum industry, the ongoing price trough has exhibited a drag on companies such as ExxonMobil (NYSE:XOM).
Back in 2011, ExxonMobil was the most valuable company in the world. Since December 2011, it’s down by almost half. But if you go back to 1991, XOM stock has gained 200%. That’s a damn sight better than dropping 20%.
Running on E
Even October’s news that Marathon reinstated its dividend on MRO stock, now 3 cents per share, doesn’t do much for me. The company is still trying to pay off debt and outside the Robinhood realm isn’t generating a whole lot of news.
Nor does it help that the incoming Biden administration will not be nearly as friendly to petroleum companies, placing the focus instead on renewable energy.
This to me raises the most compelling point of all. Beyond dollars and cents, the entire investment world now has ESG to consider: the Environmental, Social and Governance virtues that make a company worthy of your shareholder dollar.
No matter how you slice it, oil companies like Marathon score a zero on the “E” scale. Putting aside those drills in the Arctic National Wildlife Refuge for just a sec, the world population that must turn the tide on climate change before Planet Earth passes a critical tipping point.
Come on. MRO stock is a buy-and-hold cellar dweller. Short term, its boost comes largely from amateur investors and fickle adrenaline junkies who will flitter off to the next hot thing like flies on sherbet. And overall, it belongs to a moribund sector made up of corporations that have no place in the smart future of ESG investing.
If it’s oil stock you want, might I suggest any of the countless companies that crank out the olive, sunflower and coconut kind?
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.