Refiners are on a tear this morning on VLO’s earnings and possible sale of HES. The simple truth of the matter is the refinery business is going to thrive under Obama and any democrat for that matter. Domestic oil production is on the rise. Global oil supplies are at risk and the EPA will not permit the pipelines needed to properly transport the oil to ever be built. So the end result is pricing power like we’ve never seen before for the refiners, literally stealing money right from your purse.
I was a buyer of WNR from $11 and recently sold out of some for a quick trade. At the moment, I have zero exposure to the space. My question is “which refinery stock is cheapest now, post run?”
Let’s start off by looking at the 1 year and 3 month returns in the sector, to get a better idea of where Wall Street has been placing their bets.
Top 3 Performers (1 yr)
DK +171%
CVI +131%
WNR +96%
Top 3 Performers (3 mo)
CVI +56%
YPF +37%
ALJ +36%
Incidentally, over the past month HES, CVI and ALJ have performed best.
Based upon FPE ratios, YPF, WNR and MPC are cheapest. Based upon price to book ratios, HES, YPF and VLO are cheapest. And based upon price to sales ratios, PBF, ALJ and VLO are the most attractive. As you can see, it’s a mixed bag.
If you’re looking at Return on Equity ratios, CVI, DK and PBF are best.
If forced to buy into the sector now, I’d take a contrarian approach here, buying underperformers with cheaper valuations than the leaders.
TSO, PSX and HFC fit the bill best.
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