Here in the Washington, D.C., area where Fool Global Headquarters is stationed, we've been in the midst of an insane housing market, with prices continually rising into the stratosphere while interest rates remain temptingly low. It can put a Fool in a real quandary. In fact, it's given those of us who are looking to buy nervous ticks and dour dispositions. (Just take a look at new Fool writer Mathew Emmert -- he's completely over the edge.)
So, we have decided our theme for May is Buy, Sell, or Home? We figure we're not the only ones who need to work on our housing neurosis. Throughout the month, we'll be offering up some solid advice and commiseration on everything from refinancing to home improvement. You can track our progress here. And, of course, our Home Center -- and the partners therein -- is available to you all year long.
In today's Motley Fool Take:
- ExxonMobil's Slick Earnings
- Get a Broker
- Barnes & Noble.com Books a Loss
- Discussion Board of the Day: Amazon
- Be Ready for Job Loss
- Quote of Note
- Quick Takes: USA Interactive, Macromedia, U.S. manufacturing activity, more
- And Finally...
ExxonMobil's Slick Earnings
Energy giant ExxonMobil
Even without a number of positive one-time events, the Big Oiler turned in EPS of $0.71, still a 130% bump. But this was only a penny above Street estimates and -- oh, right -- it's all about the better-or-worse-than expectations game. That's why the stock yawned. Silly me, because I prefer to look at the long-term big picture.
The company is a complex array of energy businesses around the globe, but one way to understand it is in terms of upstream and downstream businesses. Upstream -- where the goods come from -- is exploration and production. Higher prices helped double profits here from $2 billion to $3.99 billion. After production, the raw materials travel downstream for refining and marketing. This part of the business earned $723 million vs. a year-ago loss. Earnings from chemicals jumped over 100% from $132 million to $287 million.
ExxonMobil must constantly invest in finding new reserves and wringing more saleable product from each barrel of oil or cubic foot of gas, and it invested 18% more in capital expenditures in Q1.
Regardless of the short-term rise and fall in energy prices, ExxonMobil's long-term value depends on economic growth -- despite advances in energy efficiency, economic development should increase energy demand until the day solar or hydrogen fuel cells take over. Those two sources may someday be cost-competitive, but I'm not holding my breath for them to displace oil in the next decade or longer -- nor should anyone doubt that this company will deploy its over $7 billion in cash in more alternative energy investments when they make sense.
In the nearer term, quarterly and even annual results naturally ebb and flow according to oil and gas prices. Right now, management finds business good enough to boost the dividend for the first time since 2001 (to the tune of 8.7%) and to repurchase shares.
In the longer term, because the company is a Rule Maker in the energy world, its shares fetch a 24 times price-to-free cash flow multiple that is not cheap relative to its stable but not growing free cash flow. But that free cash flow and a balance sheet showing increasing cash and declining debt means the 2.84% dividend yield is rock solid.
With a good track record of increasing reserves and efficiency, the business is a decent choice for periodic investment in the large cap, stable, dividend-paying dominant company portion of an IRA or other tax-advantaged account or for Drip investing.
Get a Broker
If you want to buy stocks, you're going to need a broker. And who wouldn't want to own stocks? There is no place over the past 100 years where your long-term savings would have fared better than the stock market -- not in bonds, not in real estate, not in gold, and certainly not in Beanie Babies. Our Broker Center makes it super-easy to pick the right broker for you, so check it out!
Barnes & Noble.com Books a Loss
If you were to go back a half-dozen years to a time when the mighty Barnes & Noble
Yet, here we are, with the ability to know better. Last night, Barnes & Noble's online spin-off posted a loss on flat sales growth. In fact, Barnesandnoble.com
Amazon didn't just conquer Barnes & Noble's dot-com ways -- it blew them out of the water. Amazon's market cap is nearly 10 times greater than that of the Barnes parent. The same multiple of superiority also applies to rival Borders
This isn't to say that the pure plays always win out. Webvan.com had to die and Peapod had to be gobbled up by Royal Ahold
But just as surely as the Apples
That's why picking out quality companies isn't just a matter of buying into the best. One also has to be aware of what the competition is up to. So, while Amazon may have scored a billion-dollar quarter during the same period that Barnesandnoble.com was lucky to narrowly top the $100 million mark in sales, make sure that the leaders you buy into are not losing ground to the little guys. Because, hey, Amazon was once a little guy, too.
Discussion Board of the Day: Amazon
Amazon has grown by teaming up with quite a few traditional retailers. Is it a legitimate survivor? Is the stock overpriced at these levels? Will Barnes & Noble give up and hand the keys to its online store to Amazon, like Borders did? All this and more -- in the Amazon discussion board. Only on Fool.com.
Be Ready for Job Loss
This morning, the Labor Department announced that 448,000 new applications for unemployment benefits were filed last week. That's down from the previous week, but higher than most analysts had expected. Any figure above 400,000 is considered a sign of a weak job market.
Tomorrow, the department will release unemployment numbers for April, which are not expected to paint a rosy picture, either.
Could your job be next? Layoffs can strike quickly, so you have to be prepared for the worst. Your first line of defense: a comfy cash cushion. You can consider this your emergency fund, your opportunity fund, or your "at least this account won't drop 20% in one week" fund. Whatever you call it, several thousand dollars sitting in a safe, liquid investment is ballast in the storm.
The standard advice about emergency funds is that you should have three to six months' worth of income stashed away in cash equivalents. What are those? Boring things you get at the bank, such as savings accounts, money market accounts, and certificates of deposit.
You won't earn a lot of interest on these types of accounts, and they're no fun to talk about at parties. (Could you imagine someone taking a sip of his martini and saying, "I don't mean to brag, but I just bought a CD that pays 5%"?) But the money will be there tomorrow, if you need it.
An emergency fund isn't just for potential job loss. Sudden, unexpected, big-ticket expenses are part of life. Car repairs cost hundreds of dollars, house repairs often cost thousands, and body repairs... well, you just better hope you have good health insurance.
If you don't have a reliable source of cash to draw upon during the bad times, you may have to consign yourself to the shackles of credit. Relying on plastic in times of need just makes a bad situation worse. Looking for a new job is no fun; doing so while covering your expenses with a credit card that charges 18% interest is a nightmare.
To learn more about how much you should have stuffed in your cash cushion, and how you can get some decent rates on money markets and CDs, visit our Short-Term Savings Center.
Quote of Note
"I like work: it fascinates me. I can sit and look at it for hours." -- Jerome K. Jerome, English author, Three Men in a Boat, 1889
Shares of software company Macromedia
The Institute for Supply Management, an industry association, reported that its measure of U.S. manufacturing activity declined from 46.2 in March to 45.4 in April. A number below 50 signals declining manufacturing activity, with the reverse for above 50. The ISM surveys over 400 companies in 20 industries from soup to nuts, and found in April that employment fell, inventories increased, and new export orders declined, but -- in one good sign -- order backlog rose substantially.
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- Jeff Fischer says regulations to end fraudulent stock research let companies off easy.
- Nike vs. Reebok: The athletic gear rivals go head-to-head, as LouAnn Lofton referees.
- David and Tom Gardner debate two important issues facing eBay.
- Greenspan challenges Bush's proposed cuts. Plus, what's the deal with his "enlarged prostitute"?
- In Fool's School, should you get a 15- or 30-year mortgage?
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim