The Greatest Company in the History of the World

"It's the world's greatest company, period."
 -- Arjun Murti, Goldman Sachs analyst

I'm what a lot of folks would call "obsessed" with finding great stocks. So when I heard Goldman Sachs oil oracle Arjun Murti boldly label a company as the world's greatest, you'd best believe I paid attention.

That's pretty high praise, but the facts speak for themselves. In fact, my research led me to take Murti's claim one step further: This is the greatest company in the history of the world.

The corporate titan in question produced modern-day history's greatest fortune, and earned double the combined 2008 profits of Oracle (Nasdaq: ORCL  ) and General Electric (NYSE: GE  ) . If you'd invested $1,000 in this company in 1950, your shares would now be worth about $2.3 million. And incredibly, this giant still has decades of slick profits ahead of it.

The greatest
Meet the world's greatest company: ExxonMobil. Biggest, strongest, most efficient, most evil -- there's hardly a superlative that hasn't been applied to this most successful of the Standard Oil grandchildren. But while much is made of just how great or how evil folks peg Exxon to be, there's strangely little discussion over the core drivers of why its stock has been a huge success.

It would be easy to say that Exxon's success, and that of Standard Oil's lineage -- Chevron, ConocoPhillips, etc. -- was just a function of being in the right place at the right time. Hawking oil and gasoline at the dawn of the Industrial Revolution, after all, is a Category 5 tailwind.

But there's much more to Exxon's success. Fortunately, we can also spot those discernible traits in other opportunities.

1. An owner-operator culture
John Rockefeller didn't run an infamously efficient organization just for kicks. As the largest shareholder, he had a vested interest in the success of Standard Oil. When managers and employees are shareholders alongside you, they share your desire to manage the business for the long term.

Take a look at the cutthroat world of big-box retail, where smart growth and a fanatical focus on controlling costs are crucial to long-term success. Which companies in this space have ranked among the biggest winners for investors over the past 20 years? Costco and Wal-Mart. Both are known as much for their insider ownership as for their tenacious zeal for efficiency and maximum value.

By the way, there's still plenty of alignment between Exxon's leadership and outside shareholders. The company consistently posts better margins and returns on capital than its Big Oil brethren. CEO and Chairman Rex Tillerson has plenty of incentive to keep it that way; he owns 1.1 million Exxon shares.

2. Enduring demand
Demand for oil is strikingly consistent. For most companies, steady demand equates to steady cash generation. But for Exxon, the consistency of demand for oil is just as important as the duration of that demand. Constant doubts about the staying power of oil have helped keep Exxon's shares perpetually undervalued, allowing Exxon and dividend reinvestors to steadily gobble up shares at attractive prices.

For another case study in the importance of demand, consider Procter & Gamble, which I recently recommended to Income Investor members. P&G's core products (razor blades, toilet paper, disposable diapers, etc.) all face little chance of technological obsolescence. Better yet, demand is regular and firmly entrenched. Maybe I'm just a pretty boy, but I'd be living in my car before I stopped buying razors.

Now consider companies whose fates hinge on innovation, such as an Advanced Micro Devices (NYSE: AMD  ) , Evergreen Solar (Nasdaq: ESLR  ) , or LDK Solar (NYSE: LDK  ) . As anyone who once relied on Alta Vista or Yahoo!'s (Nasdaq: YHOO  ) search engines can attest, staying on top in a cutting-edge industry is exceedingly difficult. And in the case of the names above, even staying competitive in their respective spheres is a serious challenge.

Again, historical results say it all here. According to dividend guru Jeremy Siegel, among the highest-returning S&P 500 stocks from 1957 to 2003 were:

  1. Kraft Foods
  2. R.J. Reynolds Tobacco (now owned by Reynolds American)
  3. Standard Oil of New Jersey (ExxonMobil)
  4. Coca-Cola

Cheese. Tobacco. Oil. Coke. I think you get the picture.

3. No one loves a sinner
Some folks feel a bit queasy about investing in so-called sin stocks: tobacco companies, brewers, Big Oil, etc. Just like the long-standing (and false) belief that oil demand will dry up in the not-so-distant future, many investors' aversion to investing in sin stocks just leaves the stocks that much cheaper for the rest of us. Their loss. Our gain.

As an investor, you'd rather laugh with the sinners than cry with the saints. Again, consider the primo status of oil and tobacco on the above list. Care to guess the best-performing survivor of the S&P 500 from 1957 to 2003? None other than Philip Morris, former behemoth parent of what are now known as Altria, Kraft, and Philip Morris International.

Smokin' returns
And here you thought Exxon's secret sauce was a blend of industrialization and cold-blooded ruthlessness. OK, sure, maybe there's a pinch of both in there, but plenty more was involved in the company's success. Take that knowledge forth, Fool, and:

  1. Look for owner-operator cultures and management teams motivated to focus on long-term results.
  2. Know that steady, lasting demand helps deliver expectation-beating results over time.
  3. Don't be afraid to snuggle up with sin stocks.

James Early is looking for similar opportunities over at our dividend-focused newsletter service, Income Investor. Specifically, he's searching for undervalued stocks boasting impressive, durable competitive advantages with a nice dividend to boot.

Exxon is a great company -- but because we're hunting for tastier yields, it hasn't made the cut as one of our elite Buy First recommendations. To find out which six dividend giants made our final cut, you can click here to try our service free for 30 days.

Already a member of Income Investor? Log in at the top of this page.

This article was first published April 9, 2009. It has been updated.

Senior analyst Joe Magyer owns shares of Procter & Gamble and Philip Morris International. Procter & Gamble is an Income Investor recommendation, as is Coca-Cola. Wal-Mart, Costco, and Coca-Cola are Inside Value recommendations. Costco is a Stock Advisor selection. The Motley Fool owns shares of Procter & Gamble and Costco. Philip Morris International is a Global Gains selection. After getting through all that, The Motley Fool's disclosure policy needs to go lie down for a bit.


Read/Post Comments (6) | Recommend This Article (22)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2009, at 9:47 AM, spikevoltage wrote:

    I am sorry to say that I find this article repulsive.

    "snuggle up with sin stocks"

    So what you are saying is to invest in companies that succeed financially no matter the means.

    So companies whose means include possibly: slave labor, child labor, illegal activities, or exploit communities or trash the environment are all sound investments and recommended by you, As long as they fulfill your need to make a profit.

    You may respond, "Oh, I don't mean to support 'those' kinds of companies," but where do you draw you line? You may also say that I am a bleeding heart liberal hypocrite and I may call you a heartless greedy bas***d but it would get us now where.

    Capitalism applied in this manor is a sick and headless beast.

    Where is you line? Or do you become philanthropic "repent" after making a certain amount of money?

  • Report this Comment On August 19, 2009, at 11:28 AM, lmgava wrote:

    Good post spikevoltage.

    I see a button to "recommend" the article but I don't see the button "this made me puke".

    I don't see the reason for one without the other.

    They should add it.

    I'm waiting.

  • Report this Comment On August 19, 2009, at 12:15 PM, whitjohnw wrote:

    Investors come to this site to seek out information on stocks that are increasing in value. MF's job is not to be the moral compass of corporations. No one has to invest in those companies, but I appreciate MF passing along the truth. I won't invest in big oil or big tobacco, because I don't wish to support them. But as an investor, I appreciate the knowledge and information MF publishes--whether it meets my moral standings or not.

  • Report this Comment On August 19, 2009, at 12:44 PM, spikevoltage wrote:

    whitjohnw,

    I agree that information should be freely available. I just find MF's initials to be appropriate for his business ethics.

    I would also like to see a negative recommendation button. Comments are good but I would like to bring poor articles to the attention of other readers, just like I can with good articles.

    It is very sad fact that ruthless, unethical, immoral behavior is rewarded if it makes money.

    Good business should be good business.

  • Report this Comment On August 19, 2009, at 3:50 PM, WOWmoreBS wrote:

    Spikevoltage and Imgava, I could not agree any more had I written your comments myself. I have to tell you though, this website is tied into the most evil system in the world though and therefore it serves those who care only about money, like the Greatest Company in the History of the World! Everyone knows Exxon cares for nothing but itself and the profits it can generate. For there is NO REASON except their bought influence in government that has kept the electric, even solar powered vehicles from being mandated as the only legal form of transportation. We could eliminate 99.9% of Air Pollution almost overnight by using electric vehicles for transportation. We have the technology, but it is constantly suppressed in the interest of selling the OVER-ABUNDANCE of the oil they claim is so valuable and scarce. It's all BULL and this site is in the business of spreading the filthy lies that serve the interests of the elite.

    You want to know why all the elitist propaganda sites have the Recommended button and no "this add is BS" buttons? It's because they are designed to show you what they want you to see. To take away your choice. To condition you to believe you have no choice, but to listen to them and to do as they say. You are wise for seeing this, but did you know why they do it? Check Yahoo News. Same thing there. You can Thu8mbs Up a story, but you can't thumbs down it. People, myself included, complain. Yahoo, however, doesn't care. They are not in the business of providing real choices. They are in the business of conditioning you to believe you have choices, just not the ones you want, because you are not smart enough to make the right choice, their choice....for you...because you're stupid. That is their plan for the new world brother.

    And even whitjohnw, you're right, there is nothing wrong with hearing the truth and the truth is in this world, if you invest in evil it will pay. This monetary based system is proof that DEVILS exist. The sad reality is that the DEVILS are real people.

    I would recommend anyone interested in really understanding what is going on, for them to watch a movie, freely available on the web, named The Zeitgesit Addendum. The first 18 minutes explains all you need to know to realize we're in a real bind. The remaining hour and a half details other realities and offers the only viable alternative.

    Then watch the activist training video. It is even better once you've seen the Zeitgeist Addendum. You can get it at www.zeitgeistmovie.com. There are actually three movies for about 5 hours of video that will change your life if you have an open mind and an IQ above moron. Reality is not that difficult to understand. Good luck people and pardon and grammatical or spelling errors. This was a quickie.

  • Report this Comment On August 20, 2009, at 1:29 PM, polarizerboy wrote:

    Time changes everything and will eventually bring this disgusting giant to the ground. Appropriate since they don't actually produce anything; they are simply energy bankers. They pump crap out of the ground and sell it to people to burn.

    I worked for many years for a much greater company than ExxonMobil will every be. $1000 invested in THIS company in 1948 was worth $14million by 1972. Now it is bankrupt, twice! That company was Polaroid.

    A hundred years from now, assuming homo sapiens survives that long, the survivors will look back in horror at the fossil fuel age when smart monkeys dug crap up and burned it for energy, rather than simply collecting what is needed of the 87000 terawatts of energy that arrives at the earth every moment from our sun.

    WOWmoreBS, thanks for the comments. Every day of my life I hope for a glimmer that the masses will begin to see through the veil. Every day of my life I am disappointed.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 966505, ~/Articles/ArticleHandler.aspx, 10/21/2014 8:37:55 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement