More on FTO:
This article is a about FTO - Frontier Oil
MAY 28, 2001
Hoorah for Gridlock
By Alan Abelson
Forest Oil is a company that has a terribly erratic operating history, a great big wad of debt and a stock that for years on end has inhabited the lower depths. Although we're a sucker for outfits that have been down on their luck and at long last seem to have a glimmer of hope, Forest happens to be an oil refiner and normally that would be enough to turn us off. Except.
Except that our old pal and boon companion, Archie MacAllaster, likes it -- never mind likes, he owns it -- and as any follower of our Roundtable can vouch, Archie is one of the great stock pickers of our time. And, indeed, a couple of times in the past few years, he recommended Forest at those august gatherings.
But it's this year, really, that the shares have taken off. They've been as high as 13-plus, up from a 12-month low of 5 and change, and closed Friday around 11.50.
What has gotten into the stock and what makes Archie so keen on it is pure and simple -- please don't let it get around -- heating oil and gasoline prices have gone through the roof and Forest Oil is raking in the long green like mad.
Just so you get a better idea of how lush things are for Forest Oil (and of course, refiners generally), the difference between what it pays for crude oil and what it gets for the stuff it makes from crude is, Archie reckons, a cool $15 a barrel. With half that spread, he points out, the company would still be rolling in dough.
Easily the coolest investor we know, Archie is certain that oil-product prices are likely at a peak and more than likely to decline a fair piece. But he doesn't expect them to collapse.
Meanwhile, Forest's coffers are filling up; it's paying down debt and even buying back some stock. Although he cautions any estimates are chancy because of the volatility in product prices, he nonetheless thinks the company has been lately earning close to $1 a share a month and could show over $2 a share for the second quarter. For the year, $4 wouldn't knock his socks off. In the fullness of time, the stock could sell in the high teens, he says.
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Margins good at UDS:
udscorp.com
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A seller of FTO:
Consequently, Credit Suisse First Boston's Thomas Galvin is steering clear of large-cap power and energy names that he believes will "lose the [earnings] momentum race" to technology and consumer cyclicals. Galvin's getting out of integrated oils - including Conoco (COC.A), Amerada Hess (AHC) and Phillips Petroleum (P) - and reducing his exposure to refiners such as Frontier (FTO). If you must own this group, Galvin recommends selectivity. Still attractive are companies that own unique oil-field acreage (Mitchell Energy & Development (MND), Diamond Offshore Drilling (DO), and Sante Fe International (SDC)); that provide services and equipment internationally (Baker-Hughes (BHI) and Weatherford (WFT)); and that construct new power plants (Calpine (CPN), AES (AES) and Mirant (MIR)). |
