Valero Energy (NYSE: VLO) has underperformed, but I'm nevertheless Reiterating my Buy rating for the company, first recommended on April 20, 2009 at a price of $20.08. Here's why: True, gasoline demand has lagged due to the recession, but that trend is expected to end, as lay-offs decline with the U.S. economic recovery.
That fact, combined with VLO's ability to refine lower quality crude grades, are two good reasons to consider VLO. Valero's also the largest refiner in North America, so as long they'll be Americans driving, VLO will be racking up earnings gains, later if not sooner. The First Call FY2009/FY2010 EPS estimates for VLO are a loss of 3 cents to a profit of $1.90.
Stock Analysis: Valero Energy is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in VLO now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your VLO position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $11.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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