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Oil Trends a Boon for ExxonMobil

Lower cyclical demand and strong emerging-markets potential allow the oil industry to stand out from other commodities, and ExxonMobil is the sector's best, says ClearBridge's Michael Clarfeld.

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Shannon Zimmerman: Let's talk about ExxonMobil, which is more of a sort of classic large-value holding, yet [Legg Mason ClearBridge Equity Income Builder] an equity-income fund and relatively buttoned-down. That’s the way that [ClearBridge manager Hersh Cohen managed Legg Mason ClearBridge Appreciation], as well. ExxonMobil obviously has economies of scale that are enormous, but still it's tethered to the price of a commodity. How do you get comfortable having that as a top holding?

Michael Clarfeld: Yes, that's a great question. Let me start with a little bit of big picture on how we invest and types of things we look for, and then drill down on ExxonMobil. I think you're exactly right that generally speaking given our approach, which is this high-quality bias and the idea of investing in companies that can compound returns predictably year-in, year-out, things with lot of cyclicality--and particularly deep commodity exposure--generally don't fit that bill. So, you wouldn't see us be really large in a metals company particularly or something where there's a lot of volatility.

Shannon Zimmerman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.