Jan 24 2009
Oil Refinery Stocks to Hedge Your Cash Outflow
As promised from yesterday, here are a few oil refinery stocks that will may be able to gain some profitability after the successful tightening of the supply of gasoline.
Valero (VLO) This company has always been a darling of the investing guru world because it is well managed and well connected. When it comes to the public relations and the good books, Valero seems to have it mastered. Unfortunately it seems that by the time the gurus tell people to grab the stock, the party is over. The stock dropped from a high of $62 like all the rest of the stocks dropped during the bad market downturn last year. It’s recovered from a low of $13 and is now at $22. It has a great P/E ratio, is absolutely beautifully profitable. The problem, no insiders are buying, which probably is more due to the upcoming drop in the market that is predicted by most financial whizzes. However, this one might be a good grab should the Dow finally bottom out in 5000 zone, which is where I predict it may end up at. If you buy now, hold for a bumpy ride.
Tesoro (TSO) rides on the coattails of the sector. Compared to VLO, it is overpriced with a P/E of 14. Pass.
Frontier Oil (FTO) is just as good of one as Valero except that Valero is better. FTO’s P/E is an interesting 6, but it’s the profit margin of 9% compared to Valero’s 5% that makes you sit up and take notice. FTO’s revenue growth is also beautiful. This would be all right for a grab in the future.
Holly Corp (HOC): At first glance, HOC looks interesting. It’s a small value company with a possibility for growth. If it ever drops more in price, investing in it could produce spectacular results. Right now its P/E ratio at 9 makes Valero still look like a better bargain.
These are just a few of the major oil refinery companies, and perhaps for most people, getting in on the action with all of them would be to pick up OIH, the sector related ETF. Although no one should be buying any stocks right now unless it is purely on speculation and with money you can afford to throw away, if you watch carefully, the time to buy will be soon. For now, lay low, keep the cash ready, and wait patiently.
