Oil stocks saw relative underperformance in 2019. Factors such as the U.S.-China trade war, a strong U.S. dollar vs. rival foreign currencies, and the depressed trend in crude oil prices throughout most of the year made for a tough slog in the space, notes Jim Woods, editor of Successful Investing.
One of my favorite dividend stalwarts is perhaps the quintessential stock in the oil sector, and it’s Exxon Mobil Corp. (XOM), my Top Pick for conservative investors.
The stock did finish last year in positive territory, albeit only slightly. Yet in 2020, the tables are set for a very big turnaround for investors who embrace the oil giant’s shares.
Bolstering my opinion of this stock are analysts at Bank of America Merrill Lynch (BAML). In a note to clients in December, the bank said XOM shares could surge to $100 in 2020, which is about a 43% gain from where the stock closed on Dec. 30 ($68.48).
As the bank wrote, 2020 could “finally be Exxon Mobil’s year.” The analysts at BAML cited successful project execution and accelerating growth. They also described a “step change” in cash flow that could also see the stock price climb.
“The inflection in Permian production is well under way while the first oil from Guyana confirmed for December kick starts what we expect to be 7-8 years of growth…” BAML analysts said.
Finally, in a big sign of support for Exxon Mobil, BAML named the stock its top U.S. oil major pick for 2020. I agree with the firm’s assessment here, and I think XOM is the perfect stock for contrarian investors looking for a conservative, large-cap dividend stock that’s selling at a discount.
(Editor's note: Last year, Jim Woods selected Match Group (MTCH) as a top pick; the shares rose 94%. He now says, "The company announced in December that it would fully separate from parent and incubator company IAC/Corp. (IAC). In 2020, I expect more upside in MTCH.")
