Look Beyond One-Time Events for Long-Term Winners

Life is complex. A company that is executing a long-term plan may have to contend with short-term unexpected events. At one point or another, every company hits an unexpected snag and has to report a one-time problem.

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  • Sure, for some companies, those one-time events seem to occur more often than others. For others, they truly are unusual events likely to become a distant memory as long-term plans play out.

    For instance, many companies are taking a one-time hit right now due to their decision to exit operations in Russia. Exxon Mobil (XOM) reported a $3.4 billion charge, which lowered its earnings by 79 cents per share.

    That resulted in the company only reporting earnings of $2.07 per share instead of expectations of $2.23 per share. Given the long-term potential for energy markets right now, this looks like a one-time event likely to be irrelevant in time.

    Action to take: Shares have been knocked down slightly from recent highs following earnings. Yet shares trade under 10 times earnings, looking attractive here. Plus, the company is a dividend growth stock, with a current yield just over 4.1 percent right now.

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  • For traders, the August $90 calls, last going for about $4.10, would move in-the-money even if shares didn’t go back to their 52-week highs. Traders can likely see mid-to-high double-digit returns on these prices.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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