Valero Energy Corp (VLO)

Refiners have been beaten down recently due to decreasing margins (crack spread) and a perceived decrease in demand for gasoline due to a weakening economy. I believe oil prices will pull back as money flow from commodities comes back into equities. Gasoline demand will not decrease! Wall street types do not have the pulse of the average driver. The street seems to believe everyone is out for joy rides in the suv. Driving is not a luxury. In the past year most consumers have already curtailed needless trips in the car thus gas consumption will not fall into this summer compared with last. Sixty percent of valero's throughput is sour crude which is supplied mostly from the north american continent. Processing sour is a competitive advantage. Most refiners cannot handle sour. If for some reason the flow of sweet from the arab region were disturbed valero would stand to gain immensely. Americans simply have not yet invested in significantly more fuel efficient cars and until we do gasoline demand will not decrease regardless of economic downturns.

Taking a gamble on VLO. I honestly do not understand the refineries all that well and would like to learn more about them this year. Sometimes I make CAPS picks to force myself to do that.

That said, I don't have to know much about them to green thumb this right now. Net tangible assets are worth about $30 per share and the stock is selling at a 30%+ discount to that. This is also a commoditized industry and my general rule of thumb on commodities: "buy when the companies' are losing money and everyone is terrified to own these stocks --- sell when profits are sky-high and everyone is euphoric."

I could be wrong but even given my lack of knowledge of this industry, I believe this has a very good chance of working in my favor over the long-term.

With oil hovering the $110 mark, the crack spread is absolutely torturing the refiners. Pure play refiners like Valero and Tesoro will be hurt the most. I see Valero with more potential downside in the refining group becuase its the biggest refiner in the US. Although the driving season is quickly approaching I think the stock will go nowhere but down for the next few weeks. Another factor that hurts the outlook for Valero is the fact that US Gasoline demand seems to be decreasing. Americans are finally learning not to drive so much and buy ridiculous gas guzzling SUV's. The worsening credit market will indirectly hurt Valero as people will "feel" as if they shouldn't be taking weekend vacations that involve long drives and thus more gasoline fill-ups.

VLO is the largest independent U.S. refiner of oil, and it has a unique capacity to process sour crude, which represents a great proportion of the new supply of oil (e.g., from Saudi Arabia and, to a much lesser but increasing extent, the Canadian oil sands). Since new refineries are not coming online anytime soon, and other refiners don't have, and are not likely to develop in the short to medium-term, the capacity to process sour crude effectively, Valero enjoys a competitive advantage that will likely benefit its shareholders for some time to come.

Oil prices are on the rise and I don't see that ending anytime soon. VLO is positioned nicely to take advantage of the heavier crude and I think that will continue to work to their advantage over the next few years.

VLO is located in the USA and sells to USA and Canada, both politically stable countries. A very, very good refining company. Refining capabilites will be pushed to their limits over the next few years until new refinieries can be built and brought online. VLO is positioned to reap the rewards of being a major refining company.

Valero, the best heavy oil refiner in the business with the most data to offer investors. Want to know what a cracker is? It's in the info they give out!

They have a sweet deal taking in heavy crude from down south and turning it into gasoline and other high-end products. They ar ealready established and as the NIMBY eventually fall back due to the crushing needs for fuel, I expect Valero will do well.

Valero's tight cost controls - for every 25-cent a barrel reduction in operating costs, Valero sees a 30 cent a share increase in after-tax earnings

A sometimes volitile stock that has, currently, stabilized with the rest of the oil industry. I don't like the instability in stock price. Yet---the underlying performance, and net, show that the potential value has not been realized. I expect this stock to outperform the S&P by at least 5% (if valuation stays the same it should peak 15%+)

I have been watching this stock since about 2003. I got busy for a little bit there with a life and wasn't watching and when I looked again it was up 100%!!!! OUCH! I still don't own it but I am going to put it on my list... because I want to keep oil money at home and I think this company has a very smart business plan.

Valero is a great company to begin with. It is a refiner primarily of the "sour" grade oil. With its recent purchase of Premcor, it is the leader in processing sour grade oil. With more and more new discoveries or additional capacity pumped from Saudi Arabia being of the sour type, Valero pretty much has ensured they will be pumping near 100% capacity for a long time. It takes years for new refineries to be built in the USA and many years for refineries to be converted or upgraded to handle the sour oil. Valero pretty much has guaranteed itself the top position in refining sour oil for a long time. It does cost more to process the heavier oil, but the "spread" between the cost of sour and sweet oil is wide enough for Valero to make an additional profit from the difference between the spread and the additional cost to process the heavier stuff. Of course...if the spread between the sweet and sour oil narrows, Valero would lose its advantage over the other refiners and might be at a disadvantage. I don't think this will happen with the quality of oil that is being pumped is declining.

Of course there are other factors involved, including the recent decline in price of oil. I believe Valero's ability to profit from the spread will play to its advantage and keep its margins healthy.

October rise in gasoline prices , annual cycle strong e.g winter cold , storms Use technicals to select entry point below 50 exit at 60 with 20% profit in 3/4 months OR hold for long term P/E of 6

The downside to this stock is limited (probably $14 to $15 range) while the upside is much higher. Margins have improved due to production cuts but diesel margins are down a lot versus prior year. Valero is the largest producer of gasoline and should benefit from any uptick in the economy. I believe that based on a PE of 10 and EPS of 2.60 the stock has upside to the $26 range.

VLO is currently undervalued because people believe that oil is going to get cheaper. I believe the Fall06 drop is only seasonal. Of more importance, refiners, especially those with the capacity of Valero for sour, aren't being built anytime soon.

Similar to Suncor. Oil in a temporary pullback in the face of global increase in demand. Also a hedge against the dollar falling. No new refineries coming online anytime soon. VLO is a screaming buy at or below 50$/share, which gives it's P/E ratio a paltry 6! This is the definition of value investing.

Battered from recent energy weakness. This price represents a good entry point. Energy prices long term look like they have no where to go but up. Good stock for a diversified portfolio since the market tends to fall when energy costs increase, thus reducing portfolio volitility.

Valero is a "merchant refiner." This means that it is not a fully integrated oil company with significant stake in proved oil reserves - rather, it is at the mercy of the marketplace for buying its crude feedstock. When refining margins are good, Valero does well. However, as crude oil prices rise faster than refined product prices, Valero gets caught in the squeeze. The general consensus among industry players is that we have turned the corner on world refining capacity - it is now more than required for world crude oil production. It would seem that the golden age of petroleum refining is gone. My money is going to the oil companies with the largest proven crude oil reserves.

VLO is extremely undervalued! After having a strong price correction, the stock should be attracting an awful lot of interest. Oil prices will not stay cheap & Valero will benefit with a near monopoly in size in the refining market. They bought their primary competition last year, need we say more?

I said it once and I'll say it again... VLO refines sour crude rather than light sweet crude. It's cheaper to get so that gives them a head start. I like companies that are doing it a little differently and in this rising oil market I like VLO because people are still buying Surburbans, Hummers and the like.