"It's the world's greatest company, period." -- Arjun Murti, Goldman Sachs
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 company, 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 Google
Meet the world's greatest company: ExxonMobil
It would be easy to say that Exxon's success and that of Standard Oil's other grandchildren -- Chevron
But there's much more to Exxon's success. And, fortunately, those discernable traits are ones we can spot 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 for the business to be managed for the long term.
Take a look at the cutthroat world of discount retail, where a fanatical focus on controlling costs and smart growth are crucial to long-term success. Which companies in this space have proven among the biggest winners for investors over the past 20 years? None other than Costco and Wal-Mart
And, 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 just as importantly for Exxon as the consistent demand for oil is the lasting nature of that demand. Constant doubt over the staying power of oil has helped keep Exxon's shares perpetually undervalued, allowing Exxon and dividend reinvestors to consistently gobble up shares at attractive prices.
Back to the importance of demand. Consider Procter & Gamble
Now consider a company whose fate hinges on innovation: Apple
Again, historical results say it all here. According to dividend-guru Jeremy Siegel, the highest returning S&P 500 stocks from 1957 to 2003 were:
- Kraft Foods
- R.J. Reynolds Tobacco (now owned by Reynolds American)
- Standard Oil of New Jersey (ExxonMobil)
Cheese. Tobacco. Oil. Coke. I think you get the picture.
3. No one loves a sinner
Some folks feel a bit queasy over the idea of 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. And care to guess the best-performing survivor of the S&P 500 from 1957 to 2003? None other than Philip Morris, now known as Altria.
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:
- Look for owner-operator cultures and management teams incentivized to focus on long-term results.
- Know that steady, lasting demand helps deliver expectation-beating results over time.
- Don't be afraid to snuggle up with sin stocks.
James Early and I are looking for similar opportunities over at our dividend-focused newsletter service, Income Investor. Specifically, we search 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.
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Senior analyst Joe Magyer owns shares of Philip Morris International. Smoke 'em if ya got 'em! Procter & Gamble is an Income Investor recommendation, as is Kraft Foods. Microsoft, Wal-Mart, and Coca-Cola are Inside Value recommendations, Apple is a Stock Advisor recommendation, and Google is a Rule Breakers recommendation. The Motley Fool owns shares of Procter & Gamble. The Motley Fool has a disclosure policy.