Tesoro Corp (TSO)

The refining industry usually maintains their average margins and when gasoline goes up, the margin stays the same but the company makes more money, as gasoline prices drop, the margins remain stable but earnings will decrease, discounting over th next 12 to 18 months there is no reason to have a long position in TSO, the picture will not improve, so prepare for a fall.

Another refiner who is going to blow expectations out of the water due to low crude prices. I think this one could get to 20 in a year.

Oil and gas have been pretty good to me so far in CAPS. Near a 52-week low here again, and crack spreads improve during the summer, so we'll see what happens with TSO!

This hit a 52 week low last trading day.

The refiners are getting hit because of a crack spread squeeze. I this this will get sorted out.

They aren't building any more refineries (ok, one in AZ) and no one seems to be driving any less. TSO is in smaller sized, non-traditional markets such as Hawaii, Alaska and Pacific Northwest, which I could see VLO eyeing in an expansion move as they grow over the next 10 years.

This is a 3+ year investment call.

Tesoro faces 3 current headwinds:

1.) Poor crack spread. Gas prices near $4, but oil outpacing price increase. This is because of speculators, not fundamentals. Look at contango.

2.) Reduction in demand. As Dylan Ratigan pointed out on Fast Money May 23rd, Americans drove less for the first time since 1979 (or as Guy Adami called it, since we eradicated smallpox). This is because most people don't think in terms of oil prices, they think about gas prices. Higher prices means less driving, and switching over to more fuel efficient vehicles.

3.) Poor government rules. The law stonewalled refiners' attempts to expand refining capacity to meet demand. The law also stymies their efforts at repairs and maintenance. This is a double whammy when a fire or explosion happens at a refinery (pick your recent one in the past 2 & 1/2 years...). This also mens the U.S. rarely is at "peak refining" capacity. Tesoro had a major problem at one of its refineries, and is still recovering from it. Without other facilities to compensate, that hurts margins and production.

So why am I BULLISH?

#1 - Have you seen how cheap the P/E is?

#2 - TSO is more than 60% off of its October 2007 high. That equals a more than $40 plummet in share price. That's a HUGE move down. The Slow Stoc. Ocsill. shows TSO is oversold big time.

#3 - TSO has a good man at the helm, and sometimes you have to bet on the jockey.

I don't expect a return to $60+ per share. But a 4 handle is realistic in 2-3 years. I rate TSO a buy at $25 and below, with a target of $38-43 by mid-summer 2011, which is about a 15% compounded ROI.

sells refined heavy crude oil cracked to nw summer gas at volume amounts in prime area.

oil is the thing

TSO, great management, great service, the economy is coming back, frankly I think TSO is a sure thing

A little risky but in a position to blast off

ER 5/4

Hey, we'll still need gas to get around. Crack spreads will widen again, as will Tosco's returns.

Strong nstock in a strong market

Refiners take time to get pricing power and don't deal well with oil price spikes. As oil evens out, I expect Tesoro to have an echo spike.

I'm a firm believer in the peak oil theory. Gotta go with T. Boone Pickens on this one. TSO is a big name for oil in California (where they have the most cars and use the most gasoline in the US) and Hawaii which has to import it's oil. Add to that increased demand for oil from Aias markets and this is a commodity that is going to be in scarce supply over the long term.

Refining margins haven't been this high since the Hurricane Katrina. Want to know why gas prices are up so much when crude hasn't moved much? I'll give you a hint: it's the same reason that Tesoro is a buy.

This stock is trading for less than replacement value. Right now refining is not the place to be. High input costs and demand destruction going on. Eventually they will control supply and demand, much like the airlines are now attempting. The difference is that they will not go bankrupt in the process.

TSO is demonstrating the effect of average management, good earnings, and a contrary stock market, and will continue to do so

Refiners margins have got to improve.