Exxon Boss Trump's Top Pick
Donald Trump reckons that Exxon Mobil CEO, Rex Tillerson is a “world-class player”, but the nitty gritty of financial comparison shows him to be a bit of a dud - a laggard in terms of financial performance and strategic thinking - outclassed by industry Number 2, Chevron and a host of CEOs of tech stars like Amazon, Apple and Microsoft.
The most basic measure is the way the share price of a company has performed under the CEO - for Rex, Exxon Mobil’s price rose 53% in the nearly 11 years of his time as CEO (he started on January 1, 2006). Sure he had the oil crunch to contend with, but the Exxon share price peaked at $US103.83 in June 2014, just as global oil prices started sliding. It was just over $90 a share overnight.
But that’s snail-like. Just compare Exxon’s performance in the near 11 years to that of tech giants such as Apple - whose shares are up 939%, or Netflix, the streaming video group which has seen its share prices leap more than 1,130% (and both Netflix and and Apple have in fact had share splits to reduce the share price to more interesting levels for investors).
Microsoft, which has been around for quite a while, saw its share price rise 131% since January 1, 2006 to Monday. Google (now Alphabet) has seen its shares rise 240% in the same time, but the top performer has been Amazon - its share price has leap 1,446% in the same time Rex Tillerson was at the helm of Exxon Mobil. No comparison really.
Exxon Mobil is now valued at $US377 billion, Amazon at $US361 billion, Apple at $US604 billion, Google/Alphabet at $US549 billion and Microsoft at $US483 billion. Netflix remains a tiddler, valued at just over $US52 billion, but the market sees it as having better growth prospects than Exxon Mobil at the end of nearly 11 years of the stewardship of Rex Tillerson.
And then there is Berkshire Hathaway and Warren Buffett, a business and businessman whom Tillerson and Trump would not recognise in a month of Sundays, with his belief in longterm investment and value investing and concerns about dud tax deals and corporate pay.
Berkshire Hathaway’s share price has jumped 179% in the time Rex Tillerson was running Exxon - with the market cap topping $US408 billion this week.
Reuters points out nicely that while Exxon’s shares are up 53% since 2006, the shares of rival Chevron are up 104% (and it has ridden the slide in oil prices like Exxon and ridden it better). Reuters points out that the key market measure, the S&P 500 is up 78% since the start of 2006, further underlining what a dud manager Mr Tillerson was
"Exxon's operating margin has also plunged, from 15.1 percent when Tillerson assumed the CEO role to 2.5 percent in the most recent quarter. The industry average is 6.8 percent, according to Thomson Reuters data.
“Those factors partly help explain why Exxon is now seen by Wall Street as a less-desirable investment than Chevron, which has several large oil and gas projects coming online by the end of the decade, offering far-stronger growth potential than Exxon,“ Reuters pointed out.
In 2009 Exxon paid $US41 billion for a shale gas producer called XTO Energy, at the peak of the shale gas boom, which became a bust (just ask BHP Billiton and its $US20 billion in losses, write downs and other charges on its US shale gas assets. Shale has bust begat a shale oil boom (and then the slump). Exxon missed the shale oil play, many of its rivals did, but it was the biggest energy play in its home market and especially in Texas which was one of its traditional strengths.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.