Summer means the demand for gas is going to go up. People are starting vacations with every intention to drive long distance or put in some miles at American Airline or Southwest. So naturally as the demand for gas and oil go up, the price of petroleum based products will too. I’m not interested in investing directly into commodities, as I don’t have the patience or know how to analyze those things, so I’ve invested in a company responsible for refining, retailing and transporting petroleum called Marathon Petroleum Corporation.
Name: Marathon Petroleum Corporation (as of close 5/18/2016)
Current Price: $36.07
52 Week High Price:$60.38
52 Week Low Price: $29.24
Market Capitalization: $19.96B (Large Capital)
Price/Earnings (P/E Ratio): 10.06
Earnings/Share (EPS): $3.65
Dividend: $1.28/year (3.59% yield)
Primary Business: Oil & Gas Retail/Refinery
The Good, The Bad, The Ugly
The prices is what attracts me most to this company. MPC being less than 40 means that it is definitely in a price range where I could purchase 5-10 shares immediately. So I did. I knew I wanted some exposure to the oil industry and honestly that’s because I’m curious. I’m curious about oil as a commodity and how lately the price of a barrel has bottomed out, rebounded and somehow got itself tangled up with the stock market. But I’m not so curious to actually trade a future on 100 barrels of oil. I don’t have the analytical tools needed to make a wise decision in the future space.
However the other appealing thing about MPC is the fact that the total revenue for the past 3 years as declined, but the gross profit of the company has increased. That means that the gross profit margin has actually increase over the past 3 years. Why is that important? That means despite any fluctuations in the variable costs of petroleum, workers, or anything like that MPC has remained a profitable company.
|Gross Profit Margin||12.38%||13.84%||22.43%|
Another interesting to point out about MPC is the fact they have a tremendous amount of total assets mostly due to a big jump in property and equipment. Now equipment depreciates so if there was a significant amount of equipment purchased in 2015, then I would be concerned with how the company would unload it if some macroeconomic oil/petroleum market change has a negative impact on all oil refineries and retailers.
But I saw this company as a cheap way in to figure things out in the oil space. So far I’ve made a dollar per share I own. Hoping the price gets back to its 52 week high of $60.38. If it does, I’ll gain at least $25 per share I own. Be sure to check out my show tonight at 8:30pm here and make sure to have a pen and paper. You definitely want to take notes.
Until next post folks…
*Nothing in this post is any type of advice. Just giving my perspective on this company*