Panic can be a wonderful thing. It sure was when it came to the integrated oil names.
Back on June 30th, when the extent of the BP damage was unclear, I suggested to viewers to take a look at Exxon Mobil.
Donna Mcwilliam
(AP Photo/Donna McWilliam)
The stock had become a whipping boy for "closet-indexing" money managers (fund managers who claim to add value but really only try to mimic the performance of an index), who fretted about having exposure to the space, and risk arbitrageurs, who were selling (XOM) on fears it might buy BP .
But yesterday, (XOM) blew away The Street by posting profits of over $7.5 billion, confirming the stock's roll over the last couple months.
So now what?
Well, my "Call-to-Action" is to look for another Exxon, or more specifically, another Dow componentsthat might be the victim of Closet Indexers' ire.
In my 20 years experience, I have found that when investors sell one stock because of another's problems, it's usually a good buying opportunity.
As I said on the June 30th show, the money flowing out of BP should have been reallocated into Exxon, one of BP's competitors.
It's worth noting a similar dynamic played out with Goldman Sachs; when the SEC filed its initial charge, investors jumped ship.
When the settlement was finally reached, the fear of not owning the stock became too great, and the "closet indexers" jumped back in.
Goldman and Exxon are in the past, but be on the lookout for similar situations going forward. It could be the key to beating the market next quarter. And if you are paying someone fees to manage your money, you should expect them to add value by taking this approach.
Opposing View:
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
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