Let's talk Valero - Top Stocks Blog - MSN Money
 
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Let's talk Valero

Posted Nov 21 2007, 06:33 PM by Matt Koppenheffer
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With Valero up almost 26% over the past 12 months versus the paltry sub-3% return of the S&P 500, it seems as good a time as any to question whether the stock can continue to deliver market-beating returns.

Though refiners like Valero don't directly profit from higher oil prices, rising prices do tend to boost the crack spread that refiners do profit from. And though oil fell back from the highs that it touched earlier in the day, it is still breathing down the neck of $100 per barrel.

On The Motley Fool's CAPS service, Valero has managed to score a perfect five-star rating from an aggregate 2,740 investor ratings (2,640 bulls versus just 100 bears). Though other refiners such as Delek and Alon share similarly high ratings, Valero blows both out of the water in terms of the total number of players bullish on the stock. [readmore]

Hukphinn, one of CAPS top rated players, has been bullish on Valero for over a year now and gave this pitch in support of the stock:

[Valero] 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.


There are still a lot of unknowns out there when it comes to the magnitude and duration of the housing debacle and how much exposure our financial institutions have to instruments barely worth the paper they were printed on. In an uncertain environment, the large and growing need for energy seems to be a pretty safe bet. Unless new refineries start springing from the earth, or it turns out Valero has been sitting on a bunch of subprime CDOs, I think CAPS players have highlighted a winner.

(Full disclosure: I do not have a financial position in any of the companies mentioned.)

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Comments

 

It’s amazing that oil prices are at all time highs and so are gas prices and the oil companies are reporting record profits. If the cost of doing business is at an all time high how can profits be the same unless the are raping the American public. Refineries say they are at top producing capacity and cannot produce anymore which is why they charge so much. Well if they are at maximum capacity why are no new refineries being built?? Answer because then they would not be able to charge the prices and use the excuses that they do. Why doesn't the government force them to build more refineries?? Oh because Bush and his oil buddies are controlling the white house.

When it gets bad enough that people can't pay there bills and buy food, then crime will be out of control and the first targets will be the rich !! the ones living on the other side of the tracks, they will suffer before most people let there familiy starve and there is not enough law inforcement to stop it when it starts.

i just had a thought about the current situation. right now were paying 3 bucks for cheap unleaded. if we get another hurricane or natural disaster, were royally screwed!

Affluence has caused effluence!!!!

  Too much, too fast too soon!!!!! We are creating too much trash, for this

beautiful earth God created,chemicals, poisionus gasses, exhausts from too

many vehicles, which is causing havoc with our environment.

land fills are getting full of plastics, and all kinds of material which wont decay, and

takes up space, which require making more land fills.

   Enough said for now, but God help our kids, and grandchildren...Amen..

The world moves and shakes on the energy that is oil. it did not happen over night and will not change any time soon. All world trading of oil is bought and sold using US Dollars. Relatively recent world geopolictical changes have driven the US BUCK s value down when compared to other currencies. The worlds emerging markets have further increased the demand of oil and the result is higher prices and a weaker dollar. Do not panick. Oil prices are up, so new discovery and alternatives will emerge. Prices will stablize. Sinple save your money, invest, live below your means and say your prayers and you will be just fine.    

No one wants to eliminate the middle class.  The middle class carries America on its back.  If the middle class is gone, then the streets will be overrun with diseased poor people, which will (on several levels) make the shoes of the rich soiled indeed.  

It's all about what the market will bear, and thus far, the middle class is admirably bearing away.  Oh, the middle class whines about it, but they PAY it.  They keep on paying.  As long as they keep on paying, as long as this is a NECESSITY and not a COMMODITY, then the price will continue to rise, until the middle class can't pay any higher, at which point, the price spike will stop, slow, or reverse itself.

It isn't the U.S. government doing this.  The high prices are the result of a few greedy individuals.

Read a book.  Yeesh.

The oil companies are run by the biggest criminals in the world. They steal from  the poor and get richer. I agree with C. Morris comment that the oil companies are in league with the oil market speculators that drive the price up and down and up higher to rape the public. I have believed this for quite some time. The politicians seem to have a great fear for these gigantic thieves and their huge political clout and control over our economy. With their monopoly on oil and gas prices they levy one of the biggest taxes on the poor and others. .....Obviously they are behind the OPEC gang of crooks, namely Saudi Arabia. Our President is definitely in league with them.

No one wants to eliminate the middle class.  The middle class carries America on its back.  If the middle class is gone, then the streets will be overrun with diseased poor people, which will (on several levels) make the shoes of the rich soiled indeed.  

It's all about what the market will bear, and thus far, the middle class is admirably bearing away.  Oh, the middle class whines about it, but they PAY it.  They keep on paying.  As long as they keep on paying, as long as this is a NECESSITY and not a COMMODITY, then the price will continue to rise, until the middle class can't pay any higher, at which point, the price spike will stop, slow, or reverse itself.

It isn't the U.S. government doing this.  The high prices are the result of a few greedy individuals.

The rich get richer and the poor get poorer, forget the middle class they have been used up, i mean down to poor class.

Now that gas is $3.+ a gallon,now your milk will be $4.00 a gallon, tell your kids

that they can't have milk with there rasin brand ,they will have to use water,where

is this country going? tell us how to feed the young so they won't be left behind

in school when they can't eat?

How long will our childrens children have to pay for rebuilding Irac after the war

is over? when ever that is( like Vietnam) remember the 58,000 that lost there lives,

What does this mean, that we can send in more in harms way, we lost 5,000, thats in 6 years- how many more americans won't be home for the holidays, just

add up the dead in all the wars weve had, how much is a gallon of american blood?

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Isn't this the company that Hugo Chavez owns?

None of it surprises me.  I agree that speculation should be made illegal.

To me, it's the same thing as insider trading.

The BIG Picture shows that this world holds a lot of oil, the immediate problem is getting the oil that is easy vs the oil that requires deeper drilling and more time and expense. Hmmm! I think this is all crap to get the price up to make it more lucrative to drill for oil. As far as the disel & gasoline - well I guess that is up to the refinerys! Don't you think if they would provide more refined products that the gasoline prices would gp down! Hmmm, Food for thought.

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