5 replies to this topic

[Cirrus]

I just bought some VLO May and June calls. Perfect play IMO with the nice runup and pullback. The ultimate holy grail setup with the high ADX and retrace to the 20DEMA. The world now needs refinaries desperately. I've seen some announcements that the cost to build them has like tripled in just the past few years. VLO is worth twice what its trading at right now, IMHO. I think by summers end they will be trading at 2-4 times trailing 12 MONTHS cash flow and will have net cash on the balance sheet at years end. VLO is a cash flow machine and they'll be raising dividends and buying back plenty more stock. FWIW.....

Edited by Cirrus, 18 April 2007 - 10:10 AM.

[hiker]

some infrastructure and tank sector plays, fyi -

it is impt to look at the weekly charts for these

if late to the party on these...now relevant question is where to buy a pullback that is likely in the making

daily



daily

[Cirrus]

Thanks hiker. FWIW I think analysts estimates for VLO are off by as much as 25-40% which is huge when you're talking hundreds of millions. Their earnings call is on the 24th of Apr. I think there will be plenty of institutions that would like to be long into that call. They had a weak Jan, a solid Feb and a good March. They are having blowout earings right now--probably making perhaps more than $1 per share in net income per month with the current crack. Imports will not rescue the US this summer like last summer.

[PorkLoin]

Right on, Tim. Coincidence -- sent two of my guys to a Valero refinery in NJ today. Doug

[TechSkeptic]

Check out the chart of $GASO:$WTIC. The ratio rose early in the year, and is now consolidating. Both symbols in the ratio are in pullback mode today. If the ratio takes off again to the upside, I would think that VLO should do well, since profit margins should increase.

[Cirrus]

Right on, Tim. Coincidence -- sent two of my guys to a Valero refinery in NJ today.

Doug

The trade may not work out--who knows. It just looks like a tremendous risk reward play and I actually bought the calls right at the low of the day--so far. Let's hope it's the low of the pullback.

"Kuwait is spending $9.8bn to build a huge new 600,000bpd refinery near Kuwait City"

VLO has 3.3 MBpD of capacity. Kuwait's refinery is cheap because of its massive size. I would expect that should you build a replacement for each of VLO's refineries you couldn't do it for less than $75 billion. VLO's market cap is $38 billion. You could buy the company for half its replacement cost and get its other assets free (hundreds of service stations for starters). Another example of just how screwed up WallStreet is in this 'stuff' era that we have embarked on.