Ever since oil cratered to $26/barrel on February 11th, prices have steadily inched higher. West Texas Intermediate has now climbed into the $40/barrel range. Not surprisingly, energy stocks have kept pace, with many service companies and independent producers hitting year-to-date highs. Unfortunately for some energy firms, however, this recovery will probably be too little, too late.
A few months ago, I wrote about strong insider buying and how it can be a promising sign for a company’s future stock performance. Last week, JPMorgan Chase’s CEO Jamie Dimon paid $26.6M for 500,000 of the company’s shares at $53/share. That’s about as strong as insider buying gets. The news immediately boosted the bank’s stock. It closed yesterday at $58, though it is still down 12 percent YTD versus a 6 percent decline for the S&P 500 and a 16 percent decline for the S&P 500 banking sector (KBE).
To his credit, Dimon has consistently bought large amounts of his company’s stock over the years, and his investments have always turned out well for him. Many analysts believe his latest purchase could signal a bottom for the financial sector. Does that mean investors should follow Dimon into JPM and other bank stocks?
I have my doubts.
Two weeks ago, I flew to my old stomping grounds in Houston and visited seven energy companies in three days. The mood around town and in corporate offices was far more upbeat than my last few trips down there, and not just because the Rockets were in the midst of pulling off one of the biggest comebacks in NBA playoffs history.
Despite what you might have heard, the oil business is rebounding.
[note: an earlier version of this post originally appeared on my Yahoo! Finance page.]
A few months ago, Apple (AAPL) posted one of the greatest quarterly beats in the history of capitalism and its market cap–already the world’s largest–officially doubled the size of the next closest company, a little energy outfit you might have heard of called Exxon (XOM). Nonetheless, I wrote a piece for CNBC.com at the time saying that if I had to choose between the two stocks to buy and hold for the next twenty years, I would pick up my iPad, log into my brokerage account and order a whole bunch of XOM.
With both companies releasing earnings this week, it seems like a good time to revisit that call. Apple annihilated analysts’ expectations again on Monday. Exxon also beat, but its profits were off by almost 50 percent and its stock has been the second worst performer in the Dow, down 5 percent since New Year’s Day and over 13 percent in the last 12 months. The oil giant has even ceded the number two spot in market cap to Microsoft for the time being.
So, have I changed my mind? Do I now think AAPL is a better buy than XOM? The short answer is: no. The long answer is: absolutely not.