The difference between VLO and TSO is that on an investment/trade of equal dollar amounts in each, you're much better off in TSO. I own both which is not right either, so far, should have it all in TSO.
Please don't take my response as a personal attack, it is merely my observation on the giddiness of the entire world about the refiners. That completely incorrect statement alone invalidates anything else they have to say imo. The reason that rbob gasoline is soaring is due to the refinery outages, which brings me to another point; if the refineries are operating at less than full capacity causing a squeeze in supply, then how does a refinery profit when they aren't producing? Sure, let the analysts go ahead and raise their estimates, looks like a surefire recipe for an earnings miss. Selling into earnings makes more and more sense the more bullish everyone becomes. Cramer's show is pure ratings driven tripe, although I do think the integrateds are the place to be positioned going into the driving season. In general though, unless he's speaking on the Wall Street confidential I wouldn't listen to a word he says. Bolling is a smart energy trader, think about that for just a minute. He has access to a significant audience via CNBC and he's a professional pit trader, what's the smart thing for him to do? Drive up the price of stocks he wants to buy or sell? Just think about how the market works, since when did everybody know about a surefire play that was guaranteed to be a winner, isn't that the tell tale sign to get out? When everyone and their brother is talking about it? I'm not calling the top in the refiners, and neither should anyone else, but locking in some profits might be prudent. Again, I'm not trying to convince you to sell or do anything at all, just pointing out some observations based on logic. Good luck with your investment.
You were negative on VLO when it was barely at $62. I'm looking at the fundamentals. The fundamentals of VLO look pretty good going into peak gasoline demand season. It has the lowest P/E and P/S ratios of any refiner, strong free flow cash, and is operating in a high margin geographic area of the country. It also has a capacity to refine a great amount of heavy crude. What do you see in the refining sector, or that's VLO specific, that should indicate either has topped? I have made the mistake before of not letting my winners run. I'll never make that mistake again. It doesn't mean I need to pick the absolute top, but when a chart looks like VLOs does, and it's trading at a P/E and P/S ratio that it is, with these kinds of margins, in an inelastic supply area like gasoline, with limited capacity, I'm not even remotely thinking about selling. I'm not emotionally attached to my positions. If VLO was trading at 17x earnings, and had a bad chart, and was operating in a shaky sector, I would cash in. But none of those things are true.
Reread my post; I specifically stated I was not calling a top. I beleive I pointed out my concerns with the refiners and one particular false statement by Zachs. Like I said, I'm not suggesting you need to do anything, I'm stating my opinion, it's not important whether anyone agrees or disagrees, the market is always correct.
No, I know you're not making predictions. As far as the capacity issue, I believe there is a perversity of market force at play in the refining sector, to wit; because maintenance has not gone smoothly, and because there have been so many refinery fires and other operating problems, refining capacity has been compromised, which has crimped output, and driven up price. Landis mentioned that he expected rbob to fall because CVX was bringing a 25ok per day refinery back on line on the west coast, but since that time, I believe gasoline has shot up another 20 cents/gallon or so. And we haven't even seen good weather yet in many parts of the country, which is when the real demand surge will prevail. I don't think it is optimistic to say that gasoline demand has yet to spike. I think it is realistic.
I'm not arguing against demand, I'm saying that if the refineries plant utilization is 88.4% which is a 1.3% increase from the previous week, yet gasoline output fell 2.8% in the same time period, how are they going to make as much money as analysts predict? They are utilizing more of their plants and producing less product, I don't expect higher profits based on that. Raising earnings expectations is not desirable if you want to hold through earnings. How many times have we seen a good earnings report tank the stock price? It's very common to see a run up into earnings and sharp drop off after the call. Looking at p/e's et al is fine for investors, not too useful for short term traders, imo.
I was debating buying VLO at 60 only to watch it go up to where it is now. I wouldn't touch it at 68 or near where it is now. Maybe short it but I'm avoiding it...I missed the run up in oil, gas, refiners...sucks.
Based on eps estimates, if Valero goes to $94.80, it will only have a P/E ratio of 15. If it beats estimates, which I am quite confident it will, by the numbers anticipated, $102 would conservatively give it a current 15 P/E.