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Msg  50162 of 50202  at  2/2/2020 11:49:30 PM  by

chrispi


Jim Cramer: As Amazon Soars, Exxon Mobil and Fossil Fuels Fade

Jim Cramer: As Amazon Soars, Exxon Mobil and Fossil Fuels Fade

Amazon is a main reason why you should have faith that our country remains the leader in technology. Oil companies like Exxon may just be on the wrong side of history. Ask Elon Musk.
Stocks quotes in this article: AMZN, MSFT, AAPL, GOOGL, XOM, TSLA

We've got a new member of the trillion dollar club, Amazon (AMZN) , after reporting a tremendous quarter, one far better than anticipated. The Prime sign-ups are staggering, there are now 150 million members. The advertising segment, something that didn't even exist not that long ago is making billions of dollars. Most of all, the web services business, something that many critics, and dozens of short sellers, thought was going to have a shortfall, blew the doors off the estimates. We had just spent time with Satya Nadella, CEO of Microsoft (MSFT) , a couple of weeks ago, and that business is their true growth engine, expanding at 60% and helping that company stay easily ensconced in the trillion plus club along with Apple (AAPL) , which also delivered a stellar quarter earlier this week. Alphabet (GOOGL) which doesn't report until next week, got knocked out of the club by the selloff but a good quarter will cement its membership.

No matter that Microsoft's Azure web services business is plain out stupendous, Amazon's year over year cloud business has gone from $30 billion to $40 billion year over year. I find that unbelievable, as I did so many of the things that Amazon detailed in its amazing letter. The company is a treasure; it's a main reason why you should have faith that our country remains the leader in technology.

But as I was pondering the trillion dollar club, the market leaders for what seems like ages, I watched as Exxon Mobil (XOM) reported still one more terrible quarter driving it back to levels not seen in nine years. Exxon has always been considered a start and you bought it for growth and safe but lower yield than the average oil. Now the stock yields more than 5% and there were few large takers in the session, hence the 4% decline.

You know what's amazing about this decline, something that puts the company's market cap at $262 billion? Did you know that just three years ago Exxon was, for a time, the largest company in the world? It wasn't a fluke. The stock was the first through sixth largest company for the decade preceding that honor.

Now it is tempting to say that's what happens when oil plummets. But it hasn't. Oil has been about the same price for a long time, bouncing around between $50 and $60. There is tremendous technology available to get more oil per rig. Exxon's Permian exposure has never been better and it has never been easier to ship to the Gulf because of a pipeline buildout.

So then why isn't Exxon's stock much higher? I think it is because of something I have been talking about for a long time now, I think that Exxon's in the fossil fuel business and fossil fuel is the new tobacco. Managers, and not just young managers, are shedding these stocks regardless of their promise. As the selling knocks the stocks down the self-fulfilling index fund right-sizing caused a further decline. What's really incredible about this divesting is that we are just at the cusp of the effort. It's been mostly smaller funds so far but they are impacting the stock mightily already.

The difficult thing for an oil company to do is to change its stripes. A fossil fuel company can't go fossil free. We often hear that these declines are buying opportunities. What I want to caution you about is that oil companies may just be on the wrong side of history. How do I know this? Because the most ingenious inventor of our times, Elon Musk of Tesla (TSLA) fame, has told you so. His electric vehicle is the future; the combustion engine is the past and don't think Exxon's every going to get back to the top six biggest positions ever again.

(Amazon, Microsoft, Apple and Alphabet are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks Learn more now.)

 


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Replies
Msg # Subject Author Recs Date Posted
50163 Re: Jim Cramer: As Amazon Soars, Exxon Mobil and Fossil Fuels Fade cottonbelter 0 2/3/2020 2:03:10 PM
50164 Re: Jim Cramer: As Amazon Soars, Exxon Mobil and Fossil Fuels Fade The Red 2 2/3/2020 2:12:47 PM
50167 Re: Jim Cramer: As Amazon Soars, Exxon Mobil and Fossil Fuels Fade zatowichi 21 2/5/2020 12:10:55 AM






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