Face-Off on Stocks: Exxon Mobil, Chevron, Barrick Gold [Video]

Turmoil in the Middle East and North Africa has traders worried about disruptions to the global oil supply and geopolitical instability. That fear has oil prices flirting with $100 a barrel on the Comex division of the New York Mercantile Exchange (NYX), a level not seen in more than two-and-a-half years. Gold futures, meanwhile, are likewise back on an uptrend. The yellow metal, sought as a refuge against inflation and financial instability, are back near nominal all-time highs of around $1,430 an ounce in Comex trading.

Oil and gold stocks have caught a commensurate bid as violence has spread in Libya, Africa's third-largest oil producer, and could continue to gain as anxiety mounts that upheaval could spread to Algeria, Bahrain and Saudi Arabia. Whether the oil and gold trade is already played or oil and gold stocks still look attractive at current levels is a matter of debate.

Exxon Mobil (XOM), the integrated energy giant and component of the Dow Jones Industrial Average ($INDU), is as blue of a blue chip as they come. Shares are up more than 16% for the year-to-date vs. 4% for the S&P 500 ($INX) and have popped nearly 8% since the Libya crisis began.

That run has the valuation looking a bit stretched. The stock currently trades at premiums to its own five-year average on both a trailing and forward earnings basis, according to data from Thomson Reuters. Of course if oil prices continue to rise, analysts' forward estimates will likely go higher, making the forward price/earnings (P/E) multiple look more compelling.

Chevron (CVX), the other integrated energy giant in the Dow, has also had a nice run. Shares are up more than 13% in 2011 and have jumped 11% since news from Libya caused oil prices to soar. Some analysts believe Chevron's superior upstream portfolio position and financial position warrant a modest premium for the stock.

Unfortunately, bears can say the stock may have already reached that modest premium on a relative valuation basis. Shares are currently trading at fair value to their own five-year average based on forward earnings and stand at a premium to trailing P/E. Of course bulls can point to a dividend that still yields a generous 2.8% as an indication the stock has hardly gone too high.

Barrick Gold Corp. (ABX), the world's largest gold miner, has seen its stock languish in 2011 as gold fever has been supplanted by a mania for silver and other metals, among other commodities. Shares were off as much as 13% by late January before gold prices rebounded. The stock has soared about 14% since then, putting it up about 2% for the year. With gold back at near-record levels, that run could continue apace.

More appealing is that shares still look like a bargain by relative valuation. The stock trades at a significant discount to its own five-year average on both a trailing and forward earnings basis, according to Thomson Reuters data. And then there's the dividend, which yields 0.9%. Dividends are one advantage of owning gold stocks rather than the metal itself. Gold, after all, offers no payouts.

For more on the bull and bear cases on Exxon Mobil, Chevron and Barrick Gold, see Face-off on Stocks above.

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May 29 2011 at 12:59 AM Report abuse rate up rate down Reply

Face-Off on Stocks: Exxon Mobil, Chevron, Barrick Gold

April 22 2011 at 4:46 AM Report abuse rate up rate down Reply

When gasoline hits $5 a gallon in 2012 and imperils the President's re-election chances, watch for this jackass to blame it on George Bush or "the oil companies". Forget the facts that he, along with his Democrat stooges in Congress, has done everything he can to hinder drilling and fossil fuel production in our own country. Two gulf oil drilling moratoriams, then when they were judicially broken his refusal to issue the required drilling permits, along with issuing embargoes on Anwar drilling, West coast drilling, and drilling off Florida have delighted the envirofreaks and made $5 a gallon gas a certainty. And we were saved even WORSE energy cost increases if his asinine "Cap and trade" legislation (or was it CRAP AND TRADE) had been allowed to pass. This abortion would have jacked up EVERY energy cost and corresponding pass-thru in the name of avoiding "global warming", ANOTHER Enviro and Demo piece of baloney!!!It's PAST TIME to DRILL BABY DRILL!!!!

March 02 2011 at 5:32 PM Report abuse +2 rate up rate down Reply

ik92156 .people should not invest if they cannot hold..usually when the bubble breaks if u hold it will recoup.my stock went from 102.00 to around 60.00 now its 103.00 again and i can careless because i am in it for the dividends,infact it a time to buy when the bubble breaks u get it cheaper

March 02 2011 at 2:14 PM Report abuse +1 rate up rate down Reply

jnaylor u are right.but most people dont understand and will just bitch about the prices.but they will drive 20 miles just to get something to eat,americans are less than 5 percent of world population but consume 30% of oil. if we cosume less the price will go down.its all about supply and demand

March 02 2011 at 1:54 PM Report abuse rate up rate down Reply

Pump prices rise and fall in relationship to the cost to purchase it from the distributors and refiners, and it's relationship to the wholesale cost. When there is turmoil in the producing parts of the world, and fear of shortages due to distribution problems and the fear of supply concerns, then the price always goes up rather quickly as the markets look forward and try to anticipate the situation as it will be in the future. You say..."Obama, put your foot down.." are you kidding? he has little control over this, expect for the fact that he has supported moritoriums or drilling domestically which affect our ability to be free of the dependency on foreign produced oil. Drill more domestically in the US and you will see the cost going down and the threat of worldwide disruptions having a lesser affect on the cost at the pumps. In the meantime, when the prices for crude are lower, invest in the refiners and the oilservice companies. When the prices go up, your investments will go up also. The rise in investment gains, including dividends will net out your increased cost of fuel at the retail level. Capitalism works if you understand it and embrace it....at any income level.

March 02 2011 at 10:14 AM Report abuse +2 rate up rate down Reply
2 replies to jnaylor284's comment

You are full of it. Drilling in the US will do nothing to reduce the cost. As for investing in the oil companies, you sound like someone who is well vested in the oil companies, and stand to profit advising people to invest. Then when the bubble burst they will be the ones to lose.

March 02 2011 at 12:37 PM Report abuse -3 rate up rate down Reply
obama fools


March 02 2011 at 9:35 PM Report abuse rate up rate down Reply

Anyone notice the price of oil is up for April and we get to pay the higher prices now. This is wrong they are no diffrent from the thug that steals an old womens purse.Obama where are you now.... Stand up MAN and put your foot down. Even the media seems to be missing the boat on this. oh sorry forgot they are owned in part by the oil industry... What was I thinking....

March 02 2011 at 6:58 AM Report abuse rate up rate down Reply
1 reply to maloontransllc's comment

and if the price of oil falls for may yhe price of gas will be less in april,but obviosly u will not notice

March 02 2011 at 2:02 PM Report abuse rate up rate down Reply