Despite reporting a 49% drop in fourth quarter earnings, Valero Energy Corporation (NYSE: VLO) beat Wall Street expectations by 38 cents, and you know what that usually means -- the stock jumped.

Valero was able to take advantage of price spreads on crude in the fourth quarter that were obviously not a part of analysts' estimates which they are no doubt changing as we speak.

According to the AP: "In 2008, Valero officials said they expect gasoline markets to return to more seasonal patterns, with margins improving during the summer driving season. Diesel margins were expected to be strong because inventories are lower than last year and demand remains strong, said Chairman and CEO Bill Klesse."

The price-to-cash flow ratio has been repeatedly promoted in various publications as one of the more important metrics to consider when evaluating a stock to buy. Apparently over long periods of time it is more telling than the often quoted price-to-earnings ratio. I have read that cash flow is a key metric that "my pal Warren" looks at for Berkshire Hathaway (NYSE: BRK.B) investments.

Here are the figures for the Chasing Value: Final list -- 8 stocks for 2008 in order from highest to lowest P/CF. The 12/28/08 starting stock price, yesterday's closing price and the current P/CF for the most recent fiscal year (MRFY) are listed. Only two stocks are up, while six are down.

What can I say except to report the facts as they are. Valero Energy (NYSE: VLO), one of my top picks of 2007, is my worst of 2008 -- so far! The refiners have taken a big hit this year as the Department of Energy has reported that gasoline inventories are up at the same time that oil prices have only come down marginally.

This is putting the squeeze on oil refiners like Valero, which are not able to increase margins on slackening demand at the pump. Last year, Valero made me look great all year long, rising 36%, and this year I stuck with it: Chasing Value: Valero Energy (VLO) is just so refined.

If the economy continues to look gloomy and the inventory trend continues, with supplies remaining more than ample, then perhaps my best pick will turn into my worst.

In the meantime, we are only 10 days into the new year, and January has been dismal. The market was up and down yesterday, finally ending higher, as fickle as I have seen it in a while, and it is up notably again today. Valero closed yesterday at $61.67, about $8 off my start point. It is up today even after the inventory report has been broadcast, so I think fickle is the word of the day, or even the week.

To find potential opportunities and verify my track record read Chasing Value or Serious Money.

DISCLOSURE: I own shares of VLO.

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm.

If you do not own Valero Energy Corporation (NYSE: VLO) already, you were not listening last year when I was ranting and raving every month why this was a must-own stock. It was one of my favorites last year, remains one of my favorites now and looks to have an open road ahead of it in 2008.

Valero's profit margins were squeezed in the second half of 2007 by high crude prices rising while pump prices were stable, but that is likely to change, and I think the stock can continue to appreciate significantly. It may not change fast , as the economy is going through some rough spots. Also, VLO, which is reporting earnings on January 29, may still have some lingering margin issues.

Last year this was one of my top picks and jumped 36%. I rarely make specific predictions as analysts tend to do, but I feel comfortable stating VLO can beat all the major indices. Everything I liked about Valero last year is still in play now, so I'm letting this winner ride.

This is the final review of the seven stocks I picked twelve months ago, and the time has passed quickly. This covers the period from December 28 2006 through December 27 2007. It has been a stock pickers year for sure given that the S&P 500 index moved up only modestly. Having come to this conclusion, I must admit my seven picks were all over the place. Three beat the indices, two performed sorely and two were basically break even except for the healthy dividends.

If the stock you happened to pick was Google, Inc. (NASDAQ: GOOG), which I included as sort of a "stalking horse" because of its popularity, it beat all else as a portfolio of one. As a matter of fact GOOG beat my picks by a whopping 930% meaning it bested my returns with very little effort with a gain 9.3 times the average of my seven stock picks.

The average of my seven picks fell dramatically in the last two months and I have gone from wonderboy with about a 22% YTD return, to waterboy with about 5.5% return -- UGH! I rode the Chinese market up and down, among the macro events.

Luckily for me I did not stop picking stocks last December. My actual average of all recommendations in 2007 is notably higher, see: Chasing Value: My best and worst picks of 2007.

Highlighting the fact that this year was suited to the stock pickers, James Cramer's average based on his nine picks beat all the indices by a healthy margin. Cramer, as you might imagine, had the most volatile picks. The two best Apple Inc. (NASDAQ: AAPL) and Savient Pharmaceuticals Inc. (NASDAQ: SVNT) did spectacularly well. Apple was appreciating most of the year while Savient saved Cramers tush by doubling in the last month due to approval of one of their drug therapies.

To quote one of my college professors (with thick Chicago accent) "Ya pays yer nickle 'n ya takes ya bes' shot." This year I wrote over 200 stories and reviewed even more stocks. Going over all of this material I came up with the ones listed here as my four best and four worst of the year.

• Dow Jones Industrial Average: 12,501.52 is Up to 13,359.61 (+6.86%)
• NASDAQ Composite Index: 2,425.57 is Up to 2,676.79 (+10.36%)
• Standard & Poor's 500 Index: 1,424.73 is Up to 1,476.37 (+3.62%)

Year-end is almost upon us and I need to get this short list cut down to size with two weeks to go. Because this story is an ongoing process, the heart of the story, the possible stocks, are posted below again, with the latest in bold type as the story builds and I examine things more closely. This week I am adding another energy play in the form of a Canadian Trust. Then I follow with the current edited stock list and the stocks to be cut.

Gallery: Chasing Value: 8 for 2008

In seeking value stocks that have seen their share prices greatly diminished this past year based on reduced earnings, I came across Precision Drilling Trust ADR (NYSE: PDS), which has a P/E near 5 and a dividend yield over 10%. According to AOL Money & Finance information, the company is Canada's largest drilling contractor, with a fleet of 240 service rigs. Its contract drilling units provide drilling services, equipment supply and repair, and on-site catering and management. PDS has extended its reach into the United States this year and has invested in new technology, replaced older rigs and is preparing for continued expansion. Favorable metrics include a low P/B of 1.57 and high historic profit margins of 40%.

PDS closed yesterday at a price of $15.47 per share, near its 52-week low of $15.35, a low set today during the trading day, and 44% off its high of $27.78. The P/E is a trailing figure and is actually higher but the dividend looks secure. For a few more details see: Chasing Value: Precision Drilling for 10% yield.

Disclosure: I have already bought shares of PDS at $17 in several portfolios.

The following stocks have been put in three groups, considering I want to reduce the number to eight. The first group is highly likely to make the cut based on what I know today. The second group is still under consideration but depends on what the value is in two weeks because of current volatility. The last group is being cut, and I noted why.

For the most part, this year has portrayed itself as a stock picker's market. If the stock you happened to pick was Google (NASDAQ: GOOG), which I included for fun because of its popularity, it beat all else as a portfolio of one.

The average of my seven picks fell as dramatically in November as it rose in October, reflecting the ebb and flow of the Chinese market. James Cramer's average based on his nine picks sank as well, but not as much. While Cramer managed to stay ahead of all the indices, and I beat the benchmark Standard & Poor's 500 and marginally beat the Dow Jones Industrial Average, I lost out to the NASDAQ and the average of the three.

Last month, after reporting spectacular gains, I remained realistic when posting "Of course, this could easily change given recent market volatility. A sharp downturn in the market could reverse our fortunes. A lot can happen in the remaining two months -- I take nothing for granted."

Yes, Google has done well, but Cramer's best, Apple (NASDAQ: AAPL) has done much better. It seems to be priced for perfection, as they say, but it also seems to be achieving it so far on the wings of the iPhone, iPod, and growing Mac sales. Warren Buffett voiced his opinion that the Chinese market has gotten bloated, and PetroChina ADR (NYSE: PTR), while still up significantly, dropped back off its all-time highs after becoming the second-largest capitalized company in the world.

This is going to be a journey ending with eight stock picks for 2008, on December 28, 2007. It is my intention to use the closing prices on that day for those eight stocks as the point of departure to publicly track the results and see if I can beat the market again. This year, as measured through October I have done so. I have also been tracking James Cramer's picks and he too has beaten the market to date, but lags behind me (sorry, couldn't resist). While we made some great picks, we both had some dogs as well. Furthermore, I will be the first one to admit that there is some luck involved in the short run.

Last year I beat the market, earning 29%, and it was my fifth straight year doing so after going down in flames with the rest of you when the tech bubble burst. At that time I also had the pleasure of being an Enron investor as well, so I have made plenty of blunders. But I have learned a lot from my mistakes, and hopefully others can learn from them as well as I share my investing adventures and how I turned things around.

You all can worry about whatever you want to worry about. You can follow the bulls or bears, day traders or CD holders, Wall Street pundits or the guy next door, it does not matter to me. I am looking for opportunity in the rubble.

If you are a true investor, you have a watch list -- when there is fear and negativity in the market like there has been the past few days, there will be opportunities. It is not a time to jump in with both feet, and it is not a time to speculate. It is a time to pick and choose among the companies and stocks you know well.

I would like to own more Intuitive Surgical (NASDAQ: ISRG) but it has run up so fast it has escaped my grasp, although I sense an opportunity is in the wings. I would like to own more Anglo American PLC (NYSE: AAUK) but it jumped up after recent acquisition talks in the mining industry and has not settled down yet. And it may not, but I will be patient. My regular readers know I love Huaneng Power Intl ADS (NYSE: HNP), which hardly moved today but has come down significantly in the past week, and that is very, very tempting.

I think you all have gone mad if you are buying stocks today just because the market is moving up, or you are planning on federal rate cuts yet to be announced, or Hilary Kramer or James Cramer said so, or you are afraid the train is leaving the station without you, or your stock broker or palm reader has become bullish. There is only one reason to buy stocks and that is to make money and secure your future for the long run. To do that you need to have solid reasons that can be accounted for and demonstrated to have a high degree of probablity. I did not see that today.

A friend of mine asked me today whether they should sell their shares of Google Inc. (NASDAQ: GOOG) and take profits after it's recent runnup. I told them I had no idea whether to buy, sell or hold. There was no concrete data that has been released since it's last quarterly report (after which it dropped by $50 in one day) so to me it is all wild speculation. If you believe that the rate cuts are good for the overall market which includes Google then perhaps you can hang your hat on that -- I won't be.

I have been touting Huaneng Power ADS (NYSE: HNP) for a long time and those that paid heed to my comments made a ton of money with me, but even though I love this stock I am not promoting it today after it's 45% jump in the last six weeks Volatile Market picks: Huaneng Power (HNP) is my pick for the next 50 years. I like to buy on dips as I wrote when it was down 20% off its high not when it is screaming forward to new highs. I think patience is in order.

This Chasing Value post marks my 400th story for BloggingStocks over the last 18 months. I originally agreed to do about five per month, so I have exceeded what I thought was practical, given my other responsibilities. Through this time I have learned a lot about writing, blogging, editing, the internet, AOL, and have continued to improve my investing acumen, which is a never-ending process. Many of our readers have contributed with some thought-provoking commentary and made this time a more interesting journey. I created the Chasing Value section after discussions with Senior Editor Amey Stone, and it seems to have gathered a modest following. This is the latest installment tracking my 2007 picks.

Through September, the market has benefited from a 0.5% interest rate cut by the Federal Reserve Board, recovering much of August's losses. This has also stimulated oil and gold prices to new highs and caused the dollar to shrink in value overseas. To some degree I think this resulted in foreign stocks rising significantly, most notably Huaneng Power International ADS which derives 100% of its revenue outside the United States. Last December, I made a strong case for HNP; prior to its recent rise I did so again for our Volatile Market picks: Huaneng Power (HNP) is my pick for the next 50 years.

This year continues to be a stock picker's market, as the volatile James Cramer of TheStreet.com and I have both topped the indices. Cramer made the best and worst picks for the year among those I've been tracking monthly. Apple Inc. (NASDAQ: AAPL) is the best performer among all the stocks and indices in this review, and has stabilized what might have otherwise been a mediocre showing. It has been a good year for energy and tech stocks. The past few months have been dismal for the financial sector, and anything lingering near its giant shadow.

The Dow Jones Industrial Average is once again approaching its high of 14,000 and looks like there might be room to exceed it. The housing market and subprime loans continue to worry investors, but unlike last month when an interest rate cut was not a certainty, the market seems to be betting now that another cut is not far off.

July started off so promising and ended in the dumps. After the DJIA triumphantly closed above 14,000 it beat a hasty retreat scared off by a tumbling housing market, continued worries about sub-prime loans, record highs in oil prices, continued turmoil in Iraq and perhaps a dose of summer vacationitus. In addition, market darlings Apple and Google exited the month with a few unanswered questions. Nothing could be more telling than people speculating about a Dow 15,000...16,000...17,000 the moment it passed the 14,000 mark. And silly guy that I am...thoughts of repeating my 29% 2006 return entered my mind when I reached a 24% IRR earlier. That no longer looks like a possibility although I'm still doing fine - so far.

The month of July started off about stock picking and finished about stock picking as James Cramer of TheStreet.com would support. However, among the good picks were plenty of bad ones and anything remotely associated with housing, and sub-prime loans paid a heavy price by month end. Google maintained its leadership but did take a dive after reporting earnings. The Dow Jones Industrial Average (DJIA) set so many new highs that it is not news anymore, but then there was news, most of it bad enough to put doubt in investors minds, and the market traded down. Earnings reports still trickle in but nothing major unexpected affected the market. Mergers and acquisitions are showing some signs of slowing, but deals are getting done. This is my seventh follow-up report. For reference, check out my original Dec. 28, 2006 post on this topic.

Although the DJIA has been the market leader among the indices and may indicate that investors are giving large cap stocks their due, it has retreated lately. It also may indicate that the global economy is doing better as a whole than the national economy, creating opportunity for the multi-national corporations.

Through the month of June it seems that it remains a stock pickers' market as Google Inc. (NASDAQ: GOOG), James Cramer of TheStreet.com and I all topped the indices. Google continued its strong move upward battling me for the lead, while Cramer lost much of his gains of last month competing to stay ahead of the indices. Cramer is sticking with his NYSE Euronext (NYSE: NYX) pick, and it continues to drag him down. Earnings reports still trickle in but nothing major has affected the market. Mergers and acquisitions are a bigger story and something seems to be happening every day. This is my sixth follow-up report. It is not a long time, but short of a major change in the global economic picture it looks like 2007 will be a good year. For reference, check out my original Dec. 28, 2006 post on this topic.

There seems to be growing support for large cap stocks which analysts have been talking about but now might be starting to show up for real. The Dow Jones Industrial Average has been the market leader among the indices and may indicate that investors are finaly giving large cap stocks their due. It also may indicate that the global economy is doing better as a whole than the national economy. There also may be some flight to safety. That said, June seemed more cautious then May except in foreign markets as indicated by the strong rise in my Chinese picks. Investors moved the S&P 500 index to new highs.

The month of May was all about stock picking as James Cramer of TheStreet.com has come roaring back after a poor showing in April. Google also made a strong move upward. After languishing for three months it has come close to its all time high. The Dow Jones Industrial Average (DJIA) set so many new highs that it is not news anymore. Earnings reports still trickle in but nothing major has affected the market. Mergers and acquisitions are a bigger story and something seems to be happening every day. This is my fifth follow-up report. It is not a long time, but short of a major change in the global economic picture it looks like 2007 will be a good year. For reference, check out my original Dec. 28, 2006 post on this topic.

The DJIA has been the market leader among the indices and may indicate that investors are finaly giving large cap stocks their due. It also may indicate that the global economy is doing better as a whole than the national economy. There also may be some flight to safety. That said, May was not a time of caution. Investors moved everything upward with even the S&P 500 index reaching a new high. Cramer took back the lead and for the first time the indices lagged.