"The 'low-hanging fruit' on our buy list includes refiners," says resource expert Curtis Hesler in The Professional Timing Service. Here, he looks at Valero Energy (NYSE: VLO).
"Refiners enjoy a virtual monopoly. The high price of crude has put the squeeze on profit margins -- especially in the case of gasoline, even though it is selling for over $4.00 now. Gasoline always becomes a political issue during election season.
"Nevertheless, gasoline prices are generally rising. The stock market is also getting 'depression minded,' to the point of paranoia; and this fear is dragging some stocks like refiners lower with the tide.
"The current profit squeeze will not be permanent, but Valero has another arrow in its quiver. They are able to process sour crude, which is becoming more prevalent as exporters keep more of the good stuff (light sweet crude) at home and ship the heavy sour crude.
"Their stock prices have been disappointing, I know; but this still reminds me of the mood surrounding coal a few years back when all the press was negative.
"Valero has been expanding their retail operations, which is an interesting strategy during a real estate slump.
"Obviously, they make more money selling fuel at retail than wholesale, but I keep falling back on worries about availability. When will we see the day when gasoline is rationed, or simply not available through all outlets?
"Valero may take the export land model approach and channel their refinery production to their own outlets first, giving them a big advantage on the retail side/ It is also interesting that just last May, Valero increased their dividend by 25%. That is not the sort of thing you see from a company on the brink of oblivion."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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