TSO, VLO stocks still going up

[Hugh R]

Originally Posted by djmcmath

$900? Wow, you have a lot more faith in the advice of random people on the internet than I do.

Uh, not quite. Sammy flagged them, I did some research and Valero and Tesoro seemed like pretty good investments. It just happened that Kirk Kikorian made an unexpected offer for Tesoro yesterday, and I sold it for an unexpected gain.

[sammyg2]

djmcmath, I'd bet you aren't giving Hugh enough credit. Maybe what he heard on the internet got him interested in this stock, but I'm sure he did his research and decided it was worth investing in.

Usually people who are dumb enough to invest money without checking into the investment don't have any money to invest

[djmcmath]

I didn't mean for it to be an insult. Hugh probably did exactly what I did -- looked at the TSO recommendation, did some research, realized it was probably a good value, and stepped in with what was available to play with.

Hugh is probably also more experienced than I am, which is why he has more to invest. I'm just getting started with individual stocks, so I didn't feel at all comfortable putting down more than about $700.

[Hugh R]

I'm mostly in mutual funds, but a few stocks when they come up. I bought 100 shares each of Valero and Tesoro.

[djmcmath]

The prudent thing for me to do here would be to ask advice: not about which stocks in particular, but what it is that made you think that TSO and VLO were worthwhile. Sure, Sammy's recommendation holds some weight, but what else did anyone check? I mean, it isn't about these two stocks -- it's about the other resources available to figure these things out.

My experience level is what you might describe as "very low." I read investing news and blogs, I look for analyst reports about earnings and possible buyouts. I try to understand the value of a company, from their assets, their leadership, their strategic position in the market. But I'm just some guy who doesn't know what he's doing. What do you guys do to pick a winner? What signals say "Buy" or "Sell" to you? What do you look for?

Just looking for some late-night investing discussion. Cheers, all.

Dan

[Hugh R]

As I said, I do mostly mutual funds. I looked at Moodys and Barrons and what they said, Charles Schwab as well. All three gave them an A to B buy rating. With the price of oil going up, I figured the refiners were going to make money as well. They don't eat their costs when prices go up, they pass 100% of the increase on to you. When looking at mutual funds, I look for ones that are diversified from each other, not all investing in the US or in one or two sectors, so I have US, Asian, European, Emerging Markets, commodities, manufacturing, commercial real estate, (not housing), etc. Also look for ones that have 4 or 5 Morningstar ratings have had some growth since 9/11/2001, and are making money now. If you can't make money now in a good economy,what are they going to do in a bad economy.


If you don't have a lot of money to invest, consider and index fund like an S&P 500 fund, so you don't put all your eggs in one or two baskets, meaning one or two stocks. Since I took my accounts away from Smith Barney five years ago, I've done much better, they couldn't even get me the S&P 500 five year average growth of 8.8%, and charged me a hefty management fee to boot. Try Schwab, great website for tracking and trading, and reasonable fees, they have many no load, no fee funds.

[sammyg2]

I figured the refiners were going to make money as well. They don't eat their costs when prices go up, they pass 100% of the increase on to you.

The only flaw in that logic is that the refiners do not set the price. They cannot pass 100% of the cost to the consumer, they don't control the price. They wish they did not that's just not the case. They make the stuff and sell it for as much as they can get, but it's like E-bay. The buyer sets the price.
It often follows the cost of crude (because of the speculators) but not always. The price is set by supply, demand, and speculation by investors (futures market).
Case in point, the cost of crude went through the roof a couple of months ago and gas prices fell. The crack spread (cost of crude vs. the price of finished products) fell big time this quarter, down from $25 to $5 which is close to break even. The price of gas and diesel is climbing now, but the two are not always related. This quarter's earnings reports for indepenent refiners (VLO, TSO, SUN, etc) will be poor compared to last year, but the stocks remain strong because people expect it to be strong long term, or at least through 2008.

I can remember when the refiners lost money on every gallon they made (1998) but they kept producing at a loss because if they slowed down production the government would be all over them. They are not allowed to adjust production to meet demand. If they do people go to jail. I can only remember one time when they did that and got away with it but it involved lots O'lawyers.

[djmcmath]

Thanks for the pointers -- I've heard the business about index funds before, and think it's pretty sound, fundamentally. Someone once told me that the overwhelming majority of mutual fund managers don't beat the index in the long run.

[Hugh R]

True enough about beating the indexes, many don't. Try and S&P 500 index fund for starters. You can get a no load, no fee one at Schwab.com

[sammyg2]

TSO is down over 4% today, we got out at the right time.
Earnings report due Thursday will probably be very disapointing based on the crack spread lately, it could go even lower. I figure it will lose at least another 5 or 10 points by Christmas. Then I'm back into TSO and VLO until late spring, hopefully TSO will be over 75 by June and VLO will hit 80
Strictly a guess, we'll have to see if it pans out.

[craigster59]

So Sammy, you gonna pick up some shares now that Kerkorian pulled his bid?

http://www.forbes.com/markets/2007/11/27/tesoro-tracinda-kerkorian-markets-equity-cx_cg_1127markets32.html

[sammyg2]

Yup, after christmas I'll grab about 7 thousand shares, maybe a little more. It should be 45 by then. I'm thinking close back to 65 or 70 by spring.

The greedy cowardly board of directors screwed the pooch to save their little jobs, and hurt the stock. There's talk of outing a few at the next election to make an example. I want to be officially on the rolls when that election comes.

[KFC911]

Sammy, I don't know this sector very well (at all really), but do have some positions that have done quite well (Kinder Morgan, NS (was VLP)), but primarily bought them for their dividend yields. I also know that it tends to be very cyclical, and you seem to be in tune with that aspect. Is the "after Christmas" thing due to a "cycle", or based upon the recent shenanigans of the board in you opinion? I've been toying with purchasing a small stake in TSO, but just haven't pulled the trigger....

[dtw]

I personally would commit to a box of steaks or beer-of-the-month club for a regular stock picking guide or newsletter from Sammy. I'm probably going to jump in after the first of the year as well.

-dtw

[KFC911]

"Sam's Club" ?

[sammyg2]

Whoooo there, just cause I've been lucky so far doesn't mean anything, Whenever someone gets the idea that I know what I'm doing they are in for a surprize

To answer the question, yes to both. I've been playing valero and tesoro seasonally for several years now. Out in the late summer/early fall and back in before january. This year the board of directors, the high oil prices and the climbing gas prices all complicated things.
I think the board of directors' stupidity will drive the stock down another 5 points temporarily but that is in reality an opportunity.

The recent surge in gas prices held up the stock a little but the oil prices hurt the margins, call that a wash.
Gas prices are starting to fall again because inventories have recovered, that should send the stock down.
I expect a fairly warm winter so no big run on heating oil, and I expect $4 a gallon gas by June with only a little bit of a move on oil which should drive the price up.

Lots of guessing, lots of speculation so take it with a grain of salt.

Never put all your eggs in one basket, exspecially in a volatile industry like this one has become over the last 5 years. Prior to that it was so stable it was boring, they called these companies grandmother stocks because they were so stable and safe.

I usually follow the rule of thirds. One third in bonds or precious metals, one third in relatively conservative mutual funds or similar, and one thind to play with.
Of course i'm getting older and closer to retirement so I have to play it close to the vest.

[dtw]

Didn't mean to put you on the spot. In no way do I regard your advice as a golden goose. However, I do place a high value on objective commentary from people inside various industries.

[motion]

Sammy, I've decided to take a few HELOCs out and load up on VLO after Christmas. I hope it does well! YOU DA MAN!!!

[sammyg2]

I'd hafta say that VLO is a safer gamble than TSO. It's a much bigger company with more stable operations and management. Not to say that TSO is unstable, but it's moves are more dramatic. The downside is that VLO is not as volatile so along with less risk it has less upside. I'd be real surprised if VLO goes up as much as TSO over the next 6 months percentage-wise, but it has much less risk of going down significantly.

[KFC911]

I'm gonna have some kids, then sell 'em so I can load up on TSO per my "Sam's Club" membership! Seriously, I wouldn't recklessly listen to anyone (particularly myself) on the Internet, but typically it gets my attention to something that I haven't been "up" on, then the due dilligence begins (like posting stock questions on PPOT). I'm quite sure that "luck" may have something to do with it, but we're not all a bunch of dummies here either, and I do pay attention to "success" despite their political leanings .