A new U.S. administration's promise to create a more self-reliant, energy-independent nation and the impact of efforts to first limit, then eliminate global warming from fossil fuels opens the door to alternative energy source development. But, as Saudi Arabia reminds us, barring a breakthrough technology, fossil fuels will remain a major energy source for at least the next thirty to fifty years. In other words, oil is down now, but it's not out and it isn't going away anytime soon, which is why investors who can tolerate moderate risk should consider Tesoro (NYSE: TSO).
Tesoro is one of the largest independent refiners and marketers of petroleum products in the United States. True, gasoline demand remains challenged, on a year-over-year basis, sector-wide, but any veteran oil sector analyst will tell you, that's just a disguise: the American love affair with the car has merely paused, not ended.
Further, Tesoro's strong presence in high-margin refining markets such as California, is a major positive. To be sure, the sector story here is dependent on continuing improvement in refining margins driven by reasonable oil prices (oil price spikes historically squeeze margins), but that should remain the case, at least until global GDP growth revs-up in 2010. And by then, Americans should be back in their cars, in a big way. The First Call F2009/ F2010 EPS estimates for TSO are $1.54 / $1.97.
Stock Analysis: Tesoro is a moderate-risk stock. Consider buying a 25% position in TSO now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your TSO position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $7.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
4-23-2009 @ 1:48PM
Mike said...
"then eliminate global warming..."
Um, I wish these claims would be cited with a footnote or something. Can someone show me just one piece of data which leads to evidence that "climate change" is happening? Please? All the data I've been seeing is telling me that the planet is cooling.
5-12-2009 @ 6:54PM
Galen w. Rupe said...
Tesoro is the principle player in ripping off Alaska at the gas pump. Just raised another 8 cents yesterday. Everyone should boycott Tesoro gas until they quit ripping us off