Western Refining is the best play on Oil Refiners as the Oil Refining Season Kicks off

Tags: TSO, VLO, WNR, Western Refining, Valero, Tesoro, Oil, TSO, WNR, VLO
14 Oct 1:31pm
Posted by flaljee
4 Comments
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In terms of stock price action, oil refiners like Tesoro (TSO) and Valero (VLO) typify the oil refining cycles throughout a given year. I looked back at the last 3 years (2004-2007), and here is what I learnt. Oil refiners like VLO and TSO, bottomed out typically in Sept/Oct. They ran up until June, and then spent 3 months going down. The cycle repeated again in Sept/Oct.

For example, if you bought TSO in the 3rd week of Oct and sold in the 4th week of June the following year, you made approximately 60.3%, 11.1% and 104.5% in 2004, 2005 and 2006 respectively.

If you owned VLO during the same period, you made approximately 96.9%, 17.3% and 45.7% respectively. 2005 seems like a lacklustre year only because of Katrina. Katrina hit the U.S shores in late August, and that triggered a 14.6% and 21.4% move in TSO and VLO shares just on Sept 2nd. I suspect that had those hurricanes not hit us, these stocks would have declined in August and Sept similar to 2004 and 2006.

Now that the history lesson is over, let me get to the point. Its time to buy refiners again. I specifically like Western Refining (WNR), a stock that has made me money in the past. In July, I told readers to take profits on Western Refining, and since then, the stock has dropped some 40% in 3 months, while the broader market is unchanged. While I caught the move from March to July, during the period examined above for VLO and TSO (Oct - June), WNR gained almost 150%.

Given the brief history of the oil run from $30 per barrel to $85, and the performance of the oil refiners during this period, I recommend buying WNR or even VLO and TSO at current levels.

-- Faisal Laljee
Full Disclosure: I do not own VLO, TSO or WNR, but my position can change anytime without notice. I am looking to open a position in WNR soon.

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rwmcpar
Whats your take with insider trading? A lot of the officers have decided to cash out when it was in the upper 40s. Not to mention there are a lot of big players boosting their ends? Are you pretty much banking off of higher oil prices and the cyclic history of refiners?
Posted on Oct 16, 2007 @8:51am
rwmcpar
Whats your take with insider trading? A lot of the officers have decided to cash out when it was in the upper 40s. Not to mention there are a lot of big players boosting their ends? Are you pretty much banking off of higher oil prices and the cyclic history of refiners?
Posted on Oct 16, 2007 @8:51am
rwmcpar
Whats your take with insider trading? A lot of the officers have decided to cash out when it was in the upper 40s. Not to mention there are a lot of big players boosting their ends? Are you pretty much banking off of higher oil prices and the cyclic history of refiners?
Posted on Oct 16, 2007 @8:53am
rwmcpar
Sorry, bout all the posts. Didnt mean to.
Posted on Oct 16, 2007 @8:54am
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flaljee

StocksandBlogs.com provides stock tips, equity research and markets commentary. This blog gives you money making investment ideas that can be applied to your financial portfolio, whether you are a long-term investor or looking for a quick trade. From Wall Street to Walmart, Investing to Intel and Commodities to Coffee, you will find it all here. My name is Faisal Laljee and you can email me anytime. To check how my stock picks have panned out, check out my performance using Performance Tracker. Disclaimer: The stock picks and trades listed on this blog are for educational purpose only. You should do your own research before making a trade. This blog, its affiliates, partners or authors are not responsible or liable for any losses you might sustain from the opinions stated.

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