Author Topic: Buffett takes $3.7 billion stake in Exxon Mobil  (Read 27808 times)

muscleman

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #50 on: November 26, 2013, 11:13:42 PM »
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?
I am muslceman. I have more muscle than brain!


blainehodder

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #51 on: November 27, 2013, 06:24:54 AM »
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?

Earnings Before Interest and Tax/Total Enterprise Value.  You could go further up the income statement to EBITDA yield, but I prefer EBIT when running loose screens (uses depreciation as a proxy for capital deterioration, which as we know isn't true).  Papers that I have seen seem to show it is roughly a wash on performance between the 2 stats.


Enterprise level metrics show superior correlation to results as they normalize for leverage. P/E and for that matter book/market screens give an "unfair advantage" to levered up firms. Finally book screens don't seem to work well on mid-large cap stocks in practice.


Return on Capital seems to add some juice, as Greenblatt claims in the Little Book.  The Magic formula ranks stocks on a 50/50 factor of ROC and EBIT/EV... but, you should know that Tobias Carlisle contends that the cheapest value decile stocks, ranked by ROC, should outperform the seemingly random 50/50 factor that Greenblatt has chosen.

At some point of course, over fitting may be an issue, but I suspect Tobias is closer to the truth, hence my comment on XOM.


Perhaps we should move this discussion to another thread.  I do think it would be valuable to discuss apples/apples metrics though.  I have noticed quite a bit of confusing ratios that cross compare firm, value, and equity level metrics.  Each metric can of course be useful, but only as long as you are comparing apples to apples, if you follow what I mean.

EDIT: Oops...I realize you may just be looking for the XOM EBIT/ev yield?
« Last Edit: November 27, 2013, 07:22:44 AM by blainehodder »

Dazel

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #52 on: November 27, 2013, 07:58:06 AM »



Buffett inherited mcDonalds from the his General Re take over they had a huge position built up on it....he sold it off..he makes fun of him self for doing so...was not his Pick.

However, the reality is that McDonalds fell to $11 a share in 2003...and it was going out of business etc...even Fairfax bought it then and sold it at $17...silly in hind sight...I did not buy it or Apple that traded for net cash just before that...

Obvious big mistakes! I think Exxon is small hedge on oil prices with a yield to wait.

Dazel.

fareastwarriors

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #53 on: December 02, 2013, 11:36:03 AM »
http://seekingalpha.com/article/1869721-its-not-so-much-why-buffett-bought-exxon-mobil-its-why-he-bought-it-now


It's Not So Much Why Buffett Bought Exxon Mobil, It's Why He Bought It Now

CorpRaider

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #54 on: December 11, 2013, 05:11:20 AM »
EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying.  Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet.  Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success.

Pretty consistent with Wesley Gray/Greenblatt research.

What is EBIT/Tev?

Earnings Before Interest and Tax/Total Enterprise Value.  You could go further up the income statement to EBITDA yield, but I prefer EBIT when running loose screens (uses depreciation as a proxy for capital deterioration, which as we know isn't true).  Papers that I have seen seem to show it is roughly a wash on performance between the 2 stats.


Enterprise level metrics show superior correlation to results as they normalize for leverage. P/E and for that matter book/market screens give an "unfair advantage" to levered up firms. Finally book screens don't seem to work well on mid-large cap stocks in practice.


Return on Capital seems to add some juice, as Greenblatt claims in the Little Book.  The Magic formula ranks stocks on a 50/50 factor of ROC and EBIT/EV... but, you should know that Tobias Carlisle contends that the cheapest value decile stocks, ranked by ROC, should outperform the seemingly random 50/50 factor that Greenblatt has chosen.

At some point of course, over fitting may be an issue, but I suspect Tobias is closer to the truth, hence my comment on XOM.


Perhaps we should move this discussion to another thread.  I do think it would be valuable to discuss apples/apples metrics though.  I have noticed quite a bit of confusing ratios that cross compare firm, value, and equity level metrics.  Each metric can of course be useful, but only as long as you are comparing apples to apples, if you follow what I mean.

EDIT: Oops...I realize you may just be looking for the XOM EBIT/ev yield?

I use this metric a lot as a screen for companies to monitor/check out.  Maybe layer on a subjective opinion on management and get really interested if there is a catalyst.  That's what put me on to OXY to begin with.  CVX and XOM were ranked highly as well. 

fareastwarriors

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #55 on: December 12, 2013, 11:53:41 AM »
http://online.wsj.com/news/articles/SB10001424052702304202204579252393756212898?mod=Business_newsreel_4

Exxon Presses for Exports

U.S.'s Largest Energy Producer Says North America Has Abundant, Long-Lasting Fuel Supplies



boilermaker75

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #56 on: December 13, 2013, 03:23:12 AM »
"Are you saying the RE is a negative for MCD from WEB's perspective?"

yes, ROE of real estate is not good.

Buffett owned McDonald´s probably when there was a lot of growth ahead.

From the 1998 letter to shareholders, "In particular, my decision to sell McDonald's was a very big mistake."

fareastwarriors

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #57 on: January 29, 2014, 01:03:28 PM »
Big Oil Companies Struggle to Justify Soaring Project Costs

Chevron, Exxon and Shell Spent More Than $120 Billion in 2013 to Boost Oil and Gas Output, but Production Is Down





http://online.wsj.com/news/articles/SB10001424052702303277704579348332283819314?mod=WSJ_hp_EditorsPicks

ScottHall

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #58 on: March 09, 2015, 09:20:25 PM »
I cover the stock for my firm - Buffett must've seen my recent report rating it a buy with a 16% projected 5y IRR :)

XOM is the Berkshire of big oil - not a care in the world for quarterly results, focus on the extreme long term and high roc, minimal debt and laser-like capital allocation.

I've long wondered why BRK hasn't owned this. Not sure why WEB wasn't buying in 2010 when it was below $60....not much has changed since then save the share count.

Also have wondered why BRK doesn't have MCD has a top holding. Perhaps just a matter of time.

Lmao

Nice analysis.

You, of course, have never picked a losing stock in your life. ;D

Mephistopheles

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Re: Buffett takes $3.7 billion stake in Exxon Mobil
« Reply #59 on: March 22, 2015, 12:50:02 PM »
Of course I have, but I've never bragged about Buffett (or any other top investor) buying a stock because of my analysis. His analysis, frankly, was quite garbage.

And that line about MCDs made my day. What a clown.

Of course hindsight is 20/20 eh. But to invest in companies with those fundamentals..how can you call yourself a value investor and do that I do wonder.

Pretty sure that was a joke about Buffett reading his analysis.

I don't get how he's a clown for wondering why Buffett doesn't own MCD.

So basically you chastise Buffett for investing in XOM as well, with the line "how can he call himself a value investor"?