TSO, VLO stocks still going up

[dtw]

Originally Posted by motion

Sammy, I've decided to take a few HELOCs out and load up on VLO after Christmas.

[dtw]

Originally Posted by KC911

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 .

This is exactly it. I'm generally too distracted by other pursuits (ie, LAZY) to do stock research on my own. However, catalysts like Sammy's posts about TSO/VLO here spark my interest enough to get me doing my homework. You'd have to take an on-ramp to stupidity not to do your homework and make some objective, educated decisions.

[sammyg2]

Last Wednesday I jumped back into TSO and VLO.
TSO price was $46.84, VLO was $66.02
TSO is now $49.66 at and valero is sitting at $68.10.

Up the last couple of days, prolly a normal fluctuation so far but still good.
If I was a gambler I'd short both stocks a few bucks over the next couple of weeks but I'm too chicken to do that.

I'm in for 3 or 4 months. We'll see how well or badly I do (finners crossed)

[craigster59]

Originally Posted by craigster59

I've had TSO and VLO on my "stock ticker" for awhile and they are a good stable stock. i think you're right, we'll see a significant jump happen soon. Also "Whole Foods", and Masimo (NASDQ)MASI are good stocks. I've almost doubled my money on MASI, and think it will double again, solid company with a major position in its market. I'm going to throw some cash at TSO and see what happens. Keep your ear to the ground, and update on VLO.

Quoting myself from back in October. I'm going to buy some more TSO, and some MASI which has done well for me (see chart).

[sammyg2]

Way to go Craig. I remember your post and looked into MASI but I know absolutely nothing about pharms and heathcare stocks so I shyed away from it and now I'm kicking myself. Hindsight and all that.

[djmcmath]

Speaking of kicking myself ... I watched for a while after Sammy's post, then got in at 47.5 and felt pretty good about myself. Today it's down ... 4.5% already? Ouch. Wish I had waited another week. I'm guessing that the news of dropping supplies of crude (rising crude prices) and rising supplies of gas (falling demand) make for bad news. Am I right?

My next thought is that, bad news notwithstanding, the next few months should be just fine for this company, being winter an' all. Or in other words, now would be a great time to buy another couple of shares, since it's down so dramatically, and should recover and then some. Am I right again?

[MRM]

Winter is half over. The winter factor in the market starts early fall and ends about mid-winter. There's a huge lag time in refining so the stuff that gets burned in December was probably brewed in September. By now they only have a short time of their winter formulation before they start the summer stuff.

[sammyg2]

be careful factoring in the winter blend/summer blend thing.
Sure there is such a thing but it really doesn't affect the refineries very much at all. Most of the difference is made up in the blending performed at shipping and recieving (pipelines and tank farms) and the operating units only have to make very small tweeks. No significant interuption in production at all, never could understand why they are always making such a big deal out of the switch. Maybe the media latched onto it and didn't understand it so they use it as a cliche.
now if the blending/marketting depart screws the pooch they could theoretically have too much or not enough of one blend, but that would just mean they would have to re-blend it before they send it down the pipe. Not really that much of a blip on the radar.

The things to watch are gasoline inventories, capacity utilization (how many refineries are running, how many are shut down for maintenance) and demand which is influenced by the calendar and the weather. Since these things often change around the same time as the switch to a different blend, do they assume it is due to the switch? dunno.
Right now inventories are up because lots of refineries did their required maintenance last winter and this winter isn't as harsh as it could be (yet). The economy is in question, gas prices are higher than last year so peopel are driving maaaayyybeee a little less. IMO that means wholesale gas prices will turn downward by the end of the week. Not dramatically but still a little. Maybe 5 to 10 cents over the next week. The retail prices will drop less and slower because the station owners will drag their feet to make a few more bucks.
i'm guessing prices will be flat by Feb 1st, and start upward again before March with a huge jump by April or May.
Just my crystal ball, take it with a grain of salt and YMMV.

[sammyg2]

Originally Posted by sammyg2

be careful factoring in the winter blend/summer blend thing.
Sure there is such a thing but it really doesn't affect the refineries very much at all. .............now if the blending/marketting depart screws the pooch they could theoretically have too much or not enough of one blend ..............

The things to watch are gasoline inventories, capacity utilization (how many refineries are running, how many are shut down for maintenance) and demand which is influenced by the calendar and the weather. Since these things often change around the same time as the switch to a different blend, do they assume it is due to the switch? dunno.
Right now inventories are up because lots of refineries did their required maintenance last winter and this winter isn't as harsh as it could be (yet). The economy is in question, gas prices are higher than last year so peopel are driving maaaayyybeee a little less. IMO that means wholesale gas prices will turn downward by the end of the week. Not dramatically but still a little. Maybe 5 to 10 cents over the next week. The retail prices will drop less and slower because the station owners will drag their feet to make a few more bucks.
i'm guessing prices will be flat by Feb 1st, and start upward again before March with a huge jump by April or May.
Just my crystal ball, take it with a grain of salt and YMMV.

Wow, almost prophetic. I mis-timed the bottom big-time because we got hit with a phenomenon that no one saw coming, or at least no one I know paied attention to the signs. In my last post I talked about it and explained what to look for, but I didn't see the forest for the trees.

The refineries did less maintenance this winter than normal, and they are running well for a change. The result? well over 90% capex (capacity utilization) and a huge surplus/over-production of winter blend gasoline especially on the west coast. On the DOE EIA web page it spells it out.
It has too high of a reid vapor pressure to be sold after a certain date and the buyers know it. They sat on the purchases and drove the prices waaaay down. result? Margins (cost of oil vs. cost of finished products) dropped below $8 a bbl. That means that some refineries were producing and selling gasoline at a loss. It cost more to make that they sold it for. More efficient refineries were breaking even or making a little bit, but not much. I figure it's a temporary setback but may take a little longer to climb out of the hole because some investors are shell-shocked.

Well all that drove the stock down bigtime. My reaction? Throw good money at bad, of course
Seriously, I went long on 4800 options of TSO expiring May 16th and 3150 of VLO expiring on March 21st.
If the stocks go up half as much as I orighinally predicted, I'm golden. If not ...... We'll see.

[the]

Originally Posted by sammyg2

Up the last couple of days, prolly a normal fluctuation so far but still good.
If I was a gambler I'd short both stocks a few bucks over the next couple of weeks but I'm too chicken to do that.

Man, a short on those last months would have made a bundle, real quick!

[sammyg2]

Originally Posted by the

Man, a short on those last months would have made a bundle, real quick!

Yes it would have, unfortunately I didn't look close enough to the indicators. MRM brought the biggest one up and I downplayed it. It was all there in hindsight. In the future I'm going to pay a little more attention to what he posts
I believe that these stocks are over-sold due to a temporary marketing problem driving margins down and because of the stupidity and greed of the board of directors, going long right now is a gamble but then again it always is.

The rumors of a buyout are still floating but I put no stock in them because of the recent actions of the board to prevent any kind of takeover.

[WI wide body]

Originally Posted by sammyg2

Yes it would have, unfortunately I didn't look close enough to the indicators. MRM brought the biggest one up and I downplayed it. It was all there in hindsight. In the future I'm going to pay a little more attention to what he posts
I believe that these stocks are over-sold due to a temporary marketing problem driving margins down and because of the stupidity and greed of the board of directors, going long right now is a gamble but then again it always is.

The rumors of a buyout are still floating but I put no stock in them because of the recent actions of the board to prevent any kind of takeover.

Sammy, I know that I gave you a hard time on that 1970's OPEC stuff but this is serious since I'm actually thinking of jumping into some oil. So......do you agree that of the two VLO is a safer play right now along with much more upside than TSO? Also, did that Tracenda bid for 16% of TSO @ $64 go thru or is it in limbo?

Thanx.

[KFC911]

I joined "Sams club" with TSO @ 39 last week. I've been getting hammered across the board recently (mostly giving up some portion of my gains), but time will tell on this one. Sammy, you forgot to polish your crystal ball

[djmcmath]

TSO's making a bit of a comeback in recent days. I've been hunting for news to support it and can't find anything. In fact, the news shows rising crude prices, which should have a negative impact on the crack spread, which should force TSO down, right?

Sammy, I'm soliciting your thoughts on TSO. Is the current climb just a blip, or is it the beginning of a long term trend? What's the word from the inside of the refining world?

[widebody911]

"crack spread" - there's a term you don't get to use every day...

[sammyg2]

TSO has been shakey lately but it recovering.
That stunt the board of directors pulled when they killed the tracenda deal with their poison pill hurt the stock as did an incredible glut of winter gas that drove the crack spread into neqative territory. In other words gasoline was selling on the wholesale market cheaper for a while than it cost to refine. TSO would have made about $40 million last quarter despite the poor margins, except the Hawaii refinery had all kinds of operational trouble with explosions as such which resulted in a net $40 mil loss. That is behind us now, the crack spread is climbing back to healthy levels.
Yes crude prices have risen, but wholesale prices of gas have risen more. The 3-2-1- crack spread is the key indicator, with available inventory as a strong secondary.
Study the crack spreads and inventory, that will tell you where the stocks are going short term.
conventional retail prices should be ingnored somwhat, the wholesale prices tell the story. But ... sometimes retail spot market prices can signal a big sudden move so keeping and eye on them can signal a buy or sell.

I've held my TSO and VLO stock even though they were way down last month, and my TSO stock options are nearly in the black and my VLO options are already in the money so just a little more upside and I'm giggling.

There is an emerging development on the west coast that we will be hearing about more and more, lack of high octane summer blending stocks.
In the winter the high octane alkylate and platformate (aka reformate) are not in as high of demand and there is enough to go around with a little extra. With the summer blends and CARB rules, there is pressure on the summer high octane blending stock supply. There may not be enough to go around.

What does that mean? I expect it to result in much wilder and wider swings from winter to summer prices. We may end up with extra gas inventory in the winter and less inventory in the summer ver the next coule of years. This hasn't been that strong of a factor before but everyone I talk to says it is quickly becoming a big deal.

Bottom line, I still expect TSO and VLO to climb between now and May with TSO more volatile.
VLO is bigger and more stable so has less downside. TSO typically makes larger moves than VLO, both up and down so it carries a little more risk but has better payoff potential.
both are nearly back to the levels I bought them at in December and are on the move with bullish signals.

I expect to be even on these stocks in the next few weeks and well ahead in 60 days. Rumor has it that west coast margins will be through the roof by mid-March because of refinery maintenance.
Gas could hit $4 a gallon in the bay area by mid April.

Sure wish I would have timed the bottom better, could have made a killing but I didn't see it going down as much as it did in January.

Disclaimer, the above information contains no insider information and is based on public information. One of my favorite sites is http://www.eia.doe.gov/ (free) and another is http://www.api.org/ but the real juicy info there requires membership.

[sammyg2]

Originally Posted by KC911

I joined "Sams club" with TSO @ 39 last week. I've been getting hammered across the board recently (mostly giving up some portion of my gains), but time will tell on this one. Sammy, you forgot to polish your crystal ball

it's sitting at $41.39 right now bouncing around from 40 to near the $42 ceiling (which it should break through any day now) so you're up, If I were you (and you're glad I'm not) I'd hold for a whiile longer.

[djmcmath]

Excellent. Thanks especially for the link -- it's good to know where to do my own research. Even so, a lot of the interpretation of the data requires someone who understands what they're looking at. I could have hunted down the maintenance costs for various refineries around the country over the last year, but could not have tied that in to any meaningful prediction about what that would mean for future reliability, supply issues, or stock price.

Thanks again for the analysis.

Dan

[KFC911]

Originally Posted by sammyg2

...If I were you (and you're glad I'm not) I'd hold for a whiile longer.

I rarely do "short term", so I'm still holding...

[sammyg2]

Originally Posted by djmcmath

Excellent. Thanks especially for the link -- it's good to know where to do my own research. Even so, a lot of the interpretation of the data requires someone who understands what they're looking at. I could have hunted down the maintenance costs for various refineries around the country over the last year, but could not have tied that in to any meaningful prediction about what that would mean for future reliability, supply issues, or stock price.

Thanks again for the analysis.

Dan

Out of all the measurements published by solomon brothers, OPEX (operating expense per barrel of throughput, which includes maintenance costs and efficiency) is the one i watch the closest when determining the health of a refining company. If a refinery is run down and has reliability issues, the OPEX will be high (up to $8 per bbl). If it runs very well the opex will be low (below $4 per bbl).
the fly in that ointment is someone like Thomas O'malley, who runs a refinery into the ground and doesn't spend a penny on maintenanance and upgrades. that makes the opex look good short term but eventually leads to a BOOOOOM!
O'malley usually sells the refinery right before it falls apart so the next sucker gets all the bad publicity. He did that with premcor and tosco and now he's doing it with a company called PETROPLUS.
People living in the San Fran bay area should remember Tosco, they had all kinds of environmental problems and fatalities. Eventually Tosco was forced to sell that refinery to Ultamar diamond shamrock (UDS), who sold it to TSO when UDS merged with VLO.

I wouldn't touch Petroplus with a ten foot pole (which I coudn't anyway, it's a private equity deal).