Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: profile_14 who wrote (84431)	5/13/2007 12:03:19 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 206191

would not get rid of VLO if I were you. the shares i have aren't going anywhere. i mean, aside from tax consequences, i still harbor the hope that eventually VLO will be recognized as a really stellar corporation deserving of a premium multiple. basically what's happened since i've owned it is the stock has traded between a 6 and 8 PE, but the price has risen because earnings have gone up that much. the PE itself has not budged. in my fanboy heart, i fantasize that some day the market might award the nation's largest refiner, the company with the largest sour refining capacity, the company which was recently voted as the #1 best company to work for in Fortune magazine, with, like, a 10x or a 12x multiple. i know: it's absolutely crazy to think that a company whose operations are vital to the health of the US economy should trade at only a 30% discount to the market. but it's happened before--tech companies used to trade at discounts to the market because they were considered cyclicals (which they are). then the 90s happened and people thought they were growth stocks and gave them all sorts of crazy multiples. but, of course, they were still cyclicals as the 2000s have shown (even though investors still give them growth multiples). just as the 90s provided a kind of "paradigm shift" in the way investors regarded tech stocks, i think the 2000s could provide a paradigm shift in the way investors see energy stocks. i don't expect them to trade at 100x peak earnings, but i think there could be a softening of the cyclical discount, and a recognition of the significant moats many of these cos enjoy (moats which tech companies lack). but even if that doesn't happen, i think VLO can do just fine buying in their stock like they are for a nice 15-20% IRR. VLO management themselves have been scratching their heads for years. i mean, they bought up all these refiners for ten cents on the dollar from clueless integrateds like XOM, turned them around and are the premier refiner. really every acquisition they have done, including Premcor, has turned out to be a great bargain in retrospect. and yet they have the lowest PE of NA refiners. i think at some point VLO will stop being the Rodney Dangerfield of American industrial companies and will get a bit of respect. at the same time, i think that will happen for energy as a whole. there's no disputing the points you brought up--yes, crack spreads have ballooned (although feedstock spreads have contracted rather drastically, which does not help VLO), and that's not sustainable. and you can probably find overlay charts showing a correlation between spreads and the stock price. me, i simply load up on the stock when it takes a beating and unload when it goes up, but i keep my "core" shares (i don't sell calls on them as a matter of principle). of course, in retrospect, it would have been better if i'd put my entire PF in VLO back in 2002 and just locked the door and thrown away the key -g-. good luck with your strategy, too! if VLO takes another whack, i will be there with you buying up more shares.