Stocks of the Week!

In this email:

• Pump the Brakes.. And Oil 🛢️ 

• Top Secret Tech Report 🤫 

• The Giant You Forgot About 🧠 

• Invest Before They Go Public! 🚨

Pump the Brakes.. And Oil 🛢️

Hands up if you’re into dividend paying, cash spewing giants perfectly priced for long term growth?

Yeah. Me too.

In that case, let’s talk about the OG of energy stocks, Exxon Mobil.

The Big News🚀

Exxon just closed its mega-acquisition of Pioneer Resources earlier this year. What’s that mean? They doubled their real estate in the Permian Basin which is the highest producing oil field in the US.

Money might not grow on trees but it looks like Exxon have found the spot to get it out the ground.

Now, they’re pumping out 1.3 million barrels of oil per day in the region. That’s about 20% of the total oil production of the region. 🤯 

Why the Stock’s Down 📉

The same reason most stocks took a tumble in the past week. Nobody’s safe.

The Federal Reserve said they want to pump the brakes on interest rate cuts in 2025. Cue the market panic. Investors dumped stocks & that included Exxon.

But this is why keeping a cool head always pays off. The sell off isn’t about Exxon at all.

It’s about interest rates, which have zero impact on their ability to drill oil, generate cash, or pay dividends.

You could argue interest rates being higher for longer keeps debt costs higher for longer. That’s true. But Exxon’s balance sheet is strong enough that it’s neither here nor there.

The biggest worry would be an economic slowdown that tanks the demand for oil but that’s a bit of stretch based on the data we’ve seen.

Cash Is King 👑

If we’re really worried about interest rates, you’d probably want to see a company that’s got plenty of cash, right? Well, Exxon’s got that too.

In Q3, they pulled in $11.4 billion in free cash flow. That’s 52% more than their 5 year average. And they’ve got the highest free cash flow of any large-cap energy company. It’s not even close.

The cash is being put to good use.

• Dividends: Current yield ~4%. That’s probably more than you’re getting in your savings account.

• Stock Buybacks: Fewer shares = higher value per share. My favourite equation.

• Growth: Permian Basin, baby.

Bargain or Nah? 🛒

Exxon’s forward P/E ratio is sitting at 13.3x, just a touch above its 3-year average of 12.3x. Analysts have it penciled in for $130 which still gives us plenty of room to run. Something like a 22% gain. That doesn’t include the dividends you’d be collecting in the meantime.

For context, Chevron is trading at 13x forward P/E, & ConocoPhillips is at 11.6x.

Exxon’s pricing looks pretty nice if you account for it’s growth prospects vs the competition.

The Risks ⚠️

There’s one glaringly obvious risk that Exxon is always exposed to.

If petroleum prices drop below $70/barrel for an extended period, margins could get squeezed.

We haven’t seen a sustained price below $70 since pre-covid. If prices have managed to stay stable with question marks around the US economy & even bigger ones around China’s, I think this isn’t worth losing sleep over.

The other worry is their shiny new acquisition. It looks great on the surface but any issues with production or efficiency would be a drag on the growth expectations.

That said, Exxon’s downstream business (refining & chemicals) is there to balance out any volatility in oil prices.

My Plan 🗺️ 

My portfolio is about 30% cash right now. I’m happy to start bringing that number down for a company like Exxon.

Doubling down on growth, printing cash like a mint & handing out dividends like Santa.

The sell-off looks like an overreaction & we’ve move right into a range where Exxon’s move off from plenty of times before.

I’ll keep an eye on oil prices & production but a position size of 2% of the portfolio is fine by me.

Top Secret Tech Report 🤫 

AI-ighty Potential

Dubbed the "the rocket fuel of AI" by Wired, this groundbreaking innovation has sparked fervent excitement across Wall Street. And with projections soaring to a potential market cap of $80 trillion – equivalent to 41 Amazons – the magnitude of its impact cannot be overstated.

But here's the real deal: nestled within this tech revolution lies an opportunity for sharp investors to invest in a remarkable company poised to dominate its corner of this burgeoning market.

And thanks to The Motley Fool, the full narrative of this extraordinary tech trend has been compiled into an exclusive report, designed to arm you with the insights needed to make informed investment decisions.

Access the report and unlock the secrets of tomorrow's tech revolution – before the rest of the world catches on.

The Giant You Forgot About 🧠

I’m sure there was a time when everyone was on the BABA hype train.

I guess after years of geopolitical drama, regulatory beatdowns & a stock chart looking like a ski slope, people have moved on.

Can’t say I blame them but I think the come back is on. 

🇺🇸 + 🇨🇳 = ❤️? (Maybe?)

A lot of the love loss has come from US-China relations. They’ve been….frosty… at best.

Trumps been super vocal about slapping everyone with tariffs but under the surface both sides are dropping hints about being a little nicer to each other. Policy updates in 2025 could seal the deal.

If tensions ease, the Chinese market is the spot to have your cash because their stock valuations tend to be the punching bags for all the tension.

Giants that are performing well like Alibaba stand to benefit the most.

Speaking of…

BABA’S CLOUD Is Silver Lined ☁️

Alibaba’s cloud business is being slept on. When was was the last time you heard anyone bring it up?

It holds 36% of China’s market & 5% globally.

Revenue in the cloud segment jumped +11% YoY in Q2 2025, & profit margins are quietly creeping up. AI-related product revenue? Triple-digit growth for five straight quarters. 🤯 

E-commerce has been a bit hot & cold. Domestically things are ok. Been better but the competition’s been tough. Think Temu, Shein, Tiktok all with their forks in BABA’s lunch.

Internationally, though. That looks a lot better. Double digit growth but with a caveat. Expanding globally isn’t cheap & they’re burning through it to get their foot in the door. But they’ve got plenty of cash to burn.

Cash Cow That Keeps Giving 🐄

 BABA is printing free cash flow (FCF). Over the last 12 months, they pulled in $14.75B, & sitting on a cash pile that’d make Scrooge McDuck jealous at $78.99B.

That’s 40% of their market cap just sitting there waiting to be used. It could go to growth, shareholder returns or taking over the world. 🌏️ The point is the cash gives them loads of flexibility.

When you think about about the cash they’re sitting on & how well their operations are going it makes the valuation borderline criminal.

Bargain Bin Pricing 💰

BABA’s stock is trading at a P/E of 9.82x. Compare that to tech & eCommerce giants in the US & it makes my head hurt.

Amazon (45.42x), Microsoft (34.59x), Google (24.84x).

Remember when I said everyone used to love Alibaba?

Even within its own history, BABA’s pre-crackdown P/E was at 28x. Today’s valuation is a no-brainer if you can block out the noise.

If BABA stocks matches it’s old (fair) valuation, we’re looking at a 110% gain.

Got the balls to dream bigger? If we went for peak valuation it’d be a 246% gain. 🤯 

My first target is $120 because it’s a technical level we’ve seen reached & rejected a few times in the past couple of years. That still sets me up for a 40%+ gain.

Invest Before They Go Public! 🚨

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That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️