In My Opinion!
I was looking at the G&M this morning and noticed that IMO - Imperial Oil was trading at 52 week lows. I've had past success at trolling this list of laggards for contrarian plays. Imperial is the poor Canadian cousin of Exxon Mobil. By the way Exxon owns 69% of IMO and there have been rumours for years that the parent would take the rest of it private.
IMO like it's parent company has a reputation for being very conservative with projects and capital. It has been a consistent dividend payer and has been considered a Cdn blue chip for as long as I could remember.
A quick chart of IMO vs. XOM
The two are closely correlated as expected. The are in the same industry. Integrated E&P companies with exploration, refining, as well as retail. Over the last six months their performance has diverged and I'm unsure why.
IMO has large projects like its parent company. They're involved in offshore NFLD, arctic gas, and AB tar sands. Any number of potential operational issues to cause setbacks of expectations no doubt. A quick perusal of the news feeds didn't reveal any red flags.
During the meltdown of 2008 IMO dipped to $31. Its revenue and earnings have recovered but I notice it's EPS growth has yet to return to those of the mid 2000 years.
It has performed in line with the other Cdn integrated oils including Suncor (merged with the old PetroCan), Husky, and Provident. Cenovus the Encana spinoff is the other one.
It's historical yield has always been below 1% and currently it's yielding 1.2%
For those that care it's beta is 0.83 and that of it's mighty parent XOM is 0.48.
I know that this is mostly backwards looking but valuation is a tricky business. And no I still don't believe the market is always correct in pricing especially in the short run. So although I don't know what their issues are, IMO has been known for it's good management and they'll sort it out. The majority of analysts have a hold or sell on this one and you can say this is definitely against the crowd.
As a commodity play, I don't know where the price of oil will be in 6 months but I'm more certain now than ever, that the long term price of oil will be higher. So there you have it - a lower risk way to play energy in my opinion! - IMO.
posted by Des @ 11/18/2010 11:05:00 AM
2 Comments:
Sorry the link was suppose to show IMO-T vs. XOM. You'll have to look it up yourself.
I'm not a oil/energy expert, but it seems the divergence was due to political fallout from the BP oil spill. If you do a 3-way compare of IMO vs XOM vs BP, you can see XOM followed BP down and up in the past 6 months, but IMO has held steady. Not knowing anything about their operations, but I would guess XOM and BP would have similar profiles of US offshore properties, and these would have been under threat of an deepwater drilling ban by the US gov't. There was no such political or environmental pressures on IMO in canada. It seems XOM is just recovering to previous levels and getting in line with IMO. In other words, I don't think IMO has been lagging at all, especially when you say it has been in line with Suncor, Husky, and Cenovus. But that's "in my opinion"...
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