Valero Still Has Value
Refiners had a stellar 2012, easily outperforming the overall market, as most of the sector posted better than 50% gains on the year. Historically, refiners have been cyclical plays, so, ordinarily, investors would be justified to be wary about continuing to play the group after such an outstanding year. However, the industry has changed over the years and it is propelled by longer-term secular trends.
The first tailwind for the industry is the continued large annual increases in domestic oil production providing refiners with a cheaper and more reliable product input than imports. In addition, no major refinery has been built since the 1970s, making existing refinery assets more valuable. Given the environmental stance of the current administration, it is a safe bet that no new refineries will be built in the near future. The industry seems to have gotten smarter recently about how it deploys capital expenditures, and stocks in the sector are still cheap valuation-wise, even after 2012's large run up....247 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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