Once again TSO is getting pounded. No other refiner has taken this kind of beating since earnings. VLO missed their lowered numbers and is up. WNR beat and is about the same. On the other had, TSO beat the lowered numbers, had nothing but good news, had a buy recommend by Cowen with a $65 target, and it is just getting whipped, down over 10% in 4 trading days since earnings.
The MMs are really shaken the tree unjustly....but again, that is how they make money (MM means Making Money, not Market Maker - Ha, Ha, Ha....)
Picked up more shares today at this giveaway price.
It's kind of amazing how much the market can puke these refiners out when they are unloved, which is obviously NOW. I remember (I think it was) 2001 when VLO was absolutely the most desired three-letter stock in the known universe and it traded up to 120. They were going to buy every refinery and become the megagods of refining.....that was then, this is now.
But without being pollyanna, there are couple of lessons here:
Low P/Es do not necessarily mean the market sees value (YOU might)
If you like refiners (and I do) whatever you do...don't buy every one of PSX and HFC and WNR and VLO and TSO...if the market turns against them (and the market DOES do this) then your portfolio gets destroyed!
The great opportunities lie with TSO and VLO. TSO will control the west cost soon. When their rail strategy is completed, they will move Bakken oil to the Port of Vancouver, WA, then ship it to their Cal refineries and to the Alaskan refinery, thus eliminating the dependence on high priced low quality ANS crude pushing up margins as they will receive a great price differential by using this strategy. They already are running the Mandan refinery on 100% Bakken oil. At their SLC refinery they have access to local waxy heavy crude from the Uinta basin only 100 miles away and buy that stuff at a heavy discount already and upgrades will be complete to handle even more of this crude later next year. These are just the highlights for a complete run down, go the their website to Investors and check out the presentations on 8/8/2013 using the PDF download. Very impressive.
VLO: They are going to begin switching much more of the production to diesel and exporting it. Do not believe all this #$%$ about the spread begin dead. There are several analysts who see the BNS and WTI spread moving back to $10 - $12 by years end. The traders have pushed up the price of WTI, not demand. A correction in WTI is coming. This will give VLO pricing power with improved margins and will allow them to run their refineries in the 90% plus area.
HFC or WNR are both also worth considering as they are more pure WTI plays. As WTI contracts, their margins will improve as well and both should benefit.
As was noted, it is never good to consolidate everything into one sector, however IMVHO, the refiners have been shaking out the weak hands for a while now, so do not be surprised to see them start running again....