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Five Oil Refiner Investments to Buy as ‘Golden Age’ Starts Amid War

Five oil refiner investments to buy provide a gusher of opportunities as the sector embarks upon what BofA Global Securities calls a new “golden age,”…

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Five oil refiner investments to buy provide a gusher of opportunities as the sector embarks upon what BofA Global Securities calls a new “golden age,” despite Russia’s President Vladimir Putin’s invasion and continued devastation of Ukraine and its people.

The five oil refiner investments to buy feature three stocks and two broad commodity funds that offer a chance to benefit from multiple catalysts. U.S. oil refiners hold structural cost advantages compared to international peers and should benefit from an expected post-COVID recovery in demand and refinery closings that reduce supply and lift margins.

BofA Global Securities recently released a research report that declared a new regional ‘Golden Age’ for U.S. refining. The basis for that view is valuation aided by sustainable free cash flow (FCF) that measures the cash left after a company pays its operating expenses and capital expenditures.

Free cash flow yields are at their highest levels in a decade to help shift momentum toward oil refiners, BofA reported. Recent geopolitical events, such as Putin’s unrelenting attack of Ukraine, underscore the consequences of underinvestment in production, the investment firm wrote.

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Five Oil Refiner Investments to Buy Aided by Economic Sanctions 

The shelling of hospitals, schools, residential areas, churches, nuclear power plants, oil refineries and a theater used as a shelter became a precursor to brutal rapes, torture and outright executions of Ukrainian civilians that caused many countries to put economic sanctions on Russia. Among those sanctions is severing ties with Russia as a provider of oil or natural gas, or significantly slashing such trade.

Russia’s losses due directly to Putin’s policies are leading to potential gains for Western oil refiners that are trying to fill the void for European customers seeking to wean themselves away buying energy from Russia that Putin is using to fund his invasion of Ukraine. As the old adage goes, there always is a bull market somewhere and one of the latest is in the oil patch.

One of the biggest large-cap energy companies in the market is Exxon Mobil Corp. (NYSE: XOM), a recent addition to the recommendations in the Fast Money Alert trading service led by seasoned stock pickers Mark Skousen, PhD, and Jim Woods. The integrated oil and gas company explores for, produces and refines oil around the world.

Mark Skousen, a descendant of Benjamin Franklin, talks to Paul Dykewicz. Skousen leads the Forecasts & Strategies newsletter, along with the Five Star Trader, Home Run Trader, TNT Trader and Fast Money Alert services.

Exxon Mobil Leads the Five Oil Refiner Investments to Buy

Irving, Texas-based Exxon Mobil produced an average of 2.3 million barrels of liquids and 8.5 billion cubic feet of natural gas per day in 2021. At the end of 2021, its reserves totaled 18.5 billion barrels of oil equivalent, including 66% from liquids. The company is the world’s largest refiner with a total global refining capacity of 4.6 million barrels of oil per day to rank as one of the world’s largest manufacturers of commodity and specialty chemicals.

“Size does matter when you are talking about oil and gas companies,” Skousen and Woods wrote to their Fast Money Alert subscribers. “What also matters is that oil prices have soared due to a combination of robust demand dynamics and constricted supply caused in part by Russia waging war against Ukraine.”

Paul Dykewicz meets with Jim Woods, who leads the Successful Investing and Intelligence Report investment newsletters, as well as the Bullseye Stock Trader, High Velocity Options and Fast Money Alert trading services.

With no end for Putin’s war in sight, the “smart money” is betting on higher energy prices, and the even smarter money is buying XOM, Skousen and Woods wrote. The proof comes from a 7.17% rise in the last week, a 45.56% jump so far this year and a 55.88% surge in the past 12 months.

Chart courtesy of www.stockcharts.com

Another investment professional who recommends Exxon Mobil is Bryan Perry, head of the Cash Machine investment newsletter, as well as the Premium Income, Quick Income Trader, Hi-Tech Trader and Breakout Options Alert advisory services. Perry, who has a track record for profitably recommending dividend-paying oil and natural gas companies, also is known for finding high-income investments.

Bryan Perry heads the Cash Machine newsletter.

Exxon Mobil offers a current dividend yield of 4%. BofA has placed a $120 price target on the stock.

Money Manager Picks One of Five Oil Refiner Investments to Buy

A third investment professional who is recommending Exxon Mobil is Michelle Connell, a former portfolio manager who now serves as president of Dallas-based Portia Capital Management. Connell also told me she likes Valero Energy Corp. (NYSE: VLO), of San Antonio, Texas, offering a current dividend yield of 3.4%.

Valero is San Antonio’s largest publicly traded company and among the world’s largest independent petroleum refiners. It also claims to be North America’s largest producer of renewable fuels, as well as the world’s second-largest producer of sustainable diesel.

Michelle Connell, CEO, Portia Capital Management

Connell said her reasons for recommending Valero include:

  • Its status as the second-largest refiner in the United States.
  • U.S. refiners wield cost advantages compared to foreign competitors in the European Union and elsewhere.
  • The company’s natural gas for refining oil is the cheapest in the United States.
  • Analysts recently boosted VLO earnings estimates and price targets.
  • Its potential 12-month upside: 15-20%. BofA set a $140 price target.
  • A dividend yield of 3.4%.

“The fundamentals that drove strong results in the first quarter, particularly in March, continue to provide a positive backdrop for refining margins,” said Valero’s Chairman and Chief Executive Officer Joe Gorder, when the company reported its latest financial results.

Chart courtesy of www.stockcharts.com

BofA Recommends Two of the Five Oil Refiner Investments to Buy

BofA also recommends VLO but cautions downside risks to its price objective include the company’s heavy weighting toward “sour crude.” As light-heavy crude differentials narrow, the benefits of a more complex refinery may dim and delay return on investment, BofA continued.

Plus, the company is vulnerable to a dip in refining margin, BofA opined. If demand for refined products is weaker than expected, or if oil prices remain robust, margins could be pressured.

Other risks include potential increases in operating expenditures, capital expenditures and taxes. Another risk remains due to the uncertainty of whether tax reform will be passed.

Potential outperformance of the price target for VLO could come from higher-than-expected spreads and stronger-than-forecast gasoline demand, according to BofA.

PBF Energy Earns Spot Among Five Oil Refiner Investments to Buy

PBF Energy Inc., (NYSE: PBF), of Parsippany-Troy Hills, New Jersey, is one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil and petrochemicals. 

BofA gave PBF a $35 price objective, based on an assessed discounted cash flow (DCF) value that treats the assets as annuities after deducting maintenance capital. The investment firm used a long-term Gulf Coast 321 crack spread in its benchmark assumptions of $11.50/bbl., a long-term crude differential of $3.5, a weighted average cost of capital (WACC) of 9.3%, a zero terminal growth rate and a 22% corporate tax rate.

Potential for PBF to outperform PBF’s price objective could include crude spreads and crack spreads remaining above BofA’s expectations, higher-than-expected earnings and improved valuation. Downside risks to meeting BofA’s price objective could occur if margins and crude spreads compress faster than forecast, hurting earnings and share price.

Chart courtesy of www.stockcharts.com

Pension Fund Chief Picks Two of Five Oil Refiner Investments to Buy

Beware of overbought oil stocks due to the surge in their prices so far this year,” said Bob Carlson, chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. Investors are worried that monetary tightening by the Federal Reserve and slower growth in China due to surging COVID-19 cases will reduce global growth and therefore weaken demand for energy.

“My top pick remains the ETF Energy Select Sector SPDR (XLE),” said Carlson, who also leads the Retirement Watch investment newsletter. “It tracks the S&P 500 energy sector, which is the top-performing sector in the S&P 500 in 2022 after years of underperforming the rest of the index.”

The ETF holds 21 stocks and three other types of investments. About 76% of the fund is in its 10 largest positions. Exxon Mobil (NYSE: XOM) was almost 23% of the fund, and Chevron (NYSE: CHX) was just over 21% of the fund. Other major holdings include EOG Resources (NYSE: EOG), Schlumberger NV (NYSE: SLB) and Conoco Phillips (NYSE: COP).

The diversified energy fund holds a portfolio of refiners, exploration and production (E&P) stocks, as well as companies engaged in two or more activities. XLE is up 61.60% in the last 12 months, 38.83% for the year to date, 12.50% in the past three months and 3.62% in last week. The gain in the past week shows the fund remains on the rise.

“As long as economic growth remains solid, demand will exceed supply and support high prices for energy products,” Carlson said.

Even though companies are working to increase production, it takes a “long time” to do so with new sources or to restore old ones that have been shut down, Carlson said.

Chart courtesy of www.stockcharts.com

MLOAX Joins Five Oil Retailer Investments to Buy 

A fairly aggressive fund is Cohen & Steers MLP & Energy Opportunity (MLOAX), Carlson said. It looks for companies in exploration, production, gathering, transportation, processing, storage, refining, distribution, or marketing of oil, natural gas and other energy sources.

The fund’s largest holding is Enbridge Inc. (NYSE: ENB), which has an extensive pipeline network that transports natural gas and other energy products. The fund’s second-largest holding is Cheniere Energy Inc. (NYSEAMERICAN: LNG), which exports liquefied natural gas (LNG). Other top holdings are the Williams Companies (NYSE: WMB), TC Energy (NYSE: TRP) and Energy Transfer LP (NYSE: ET).

The fund has 56 positions, with 55% of the fund in the 10 largest positions. MLOAX is up 33.64% in the past 12 months and 20.73% for the year to date. It also has climbed 11.75% for the past three months and 2.41% in the last week.

As an open-ended mutual fund with several share classes, investors should determine which share class has the lowest cost by inquiring with their brokers.

Chart courtesy of www.stockcharts.com

COVID-19 Infects More than Half the People in America

COVID-19 cases and hospitalizations have risen about 10% in the last week. The U.S. Centers for Disease Control and Prevention (CDC) also has reported more than half the people in America, including most children, have been infected with the coronavirus.

In China, lockdowns have affected at least 373 million people, including roughly 40% of the country’s gross domestic product (GDP). A key effect is continued disruption of the world’s supply chain for many products, including oil.

Most of Shanghai’s 25 million residents remain in lockdown, as the Chinese military and additional health workers have been sent there to aid in the response. Shanghai, home to the world’s largest port, has strained to unload cargo due to strict regulations that have caused shipping containers to stack up. Some frustrated Shanghai residents have taken videos that went viral to show people screaming from high-rise buildings about needing food, but the government is trying to crack down on the posting of such expressions of frustration.

Also in China, young children with COVID-19 have been separated forcibly from their parents, fueling public discord, as Chinese leaders seek to stop the spread of a new, contagious subvariant of Omicron, BA.2. The variant also is causing a new wave of infections in European nations that include Germany, the Netherlands and Switzerland.

U.S. COVID Booster Shots Top 1 Million and Deaths Near 1 Million 

COVID-19 deaths worldwide exceeded 6.24 million to total 6,240,888 on May 3, according to Johns Hopkins University. Cases across the globe have jumped to 514,913,818.

U.S. COVID-19 cases, as of May 3, hit 81,506,075, with deaths rising to 994,744. America has the dubious distinction as the nation with the most COVID-19 cases and deaths.

Also as of May 3, 257,823,699 people, or 77.7% of the U.S. population, have obtained at least one dose of a COVID-19 vaccine, the CDC reported. Fully vaccinated people total 219,849,502 or 66.2% of the U.S. population, according to the CDC. America also has topped a key milestone by giving a COVID-19 booster vaccine to 100.8 million people.

The five oil refiner investments to buy offer another niche of energy stocks and funds that show signs of further gains ahead. Investors willing to buy after the assets have risen significantly in value could be rewarded by additional gains ahead, even if the easy money has gone to others.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for multiple-book pricing.

The post Five Oil Refiner Investments to Buy as ‘Golden Age’ Starts Amid War appeared first on Stock Investor.

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Government

Cruise Line Drops Pre-Cruise Covid Testing Rule

The major cruise lines walk a delicate line. They need to take the actual steps required to keep their passengers safe and they also need to be aware of…

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The major cruise lines walk a delicate line. They need to take the actual steps required to keep their passengers safe and they also need to be aware of how things look to the outside public. It's a mix of practical covid policy balanced with covid theater.

You have to do the right thing -- and Royal Caribbean International (RCL) - Get Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get Carnival Corporation Report, and Norwegian Cruise Lines (NCLH) - Get Norwegian Cruise Line Holdings Ltd. Report have been doing that with very meticulous protocols-- but you also have to show the general public you're taking the pandemic seriously. The cruise industry has been under the microscope of both public perception and the Centers for Disease Control (CDC) since covid first appeared.

That's not because you're likely to get infected on a cruise ship than at a concert, sporting event, theme park, restaurant, or any other crowded space. It's because when you get sick at one of those locations nobody can pinpoint the source of your infection

Cruises last from 3 days to 7 days or even longer and that means that some people will get covid onboard and that will be blamed on the cruise industry. To mitigate that Carnival, Royal Caribbean, and Norwegian have rigid protocols in place that require passengers 12 and over to be vaccinated as well as pre-cruise covid tests taken no more than two days before your cruise leaves.

Once cruise line has dropped that testing requirement (at least on a few sailings) and that could lead Royal Caribbean, Carnival, and Norwegian to follow. 

Sina Schuldt/picture alliance via Getty

Holland America Drops Some Covid Testing

As the largest cruise lines sailing from the U.S., Royal Caribbean, Carnival, and Norwegian don't want to be the first to make major covid policy changes. They acted more or less in tandem when it came to loosening, then dropping mask rules and have generally followed the lead of the CDC, even when that agency's rules became optional.

Now, Holland America cruise line has dropped pre-cruise covid testing on a handful of cruises. It's a minor move, but it does provide cover and precedent for Royal Caribbean, Carnival, and Norwegian to eventually do the same.

"Holland America Line becomes the first US-based cruise line to remove testing for select cruises. Unfortunately for those taking a cruise from the United States, the new protocols are only in place for certain cruises onboard the company’s latest ship, the Rotterdam, in Europe," Cruisehive reported.

The current CDC guidelines do recommend pre-cruise testing, but the cruise lines into following those rules. By picking cruises sailing out of Europe, Holland America avoids picking a fight with the federal agency just yet, but it will be able to gather data as to whether the pre-cruise testing actually helps.

Holland America has not changed its vaccination requirements for those cruises which mirror the 12-and-up rule used by Royal Caribbean, Carnival, and Norwegian.

Some guests have called for the end of the testing requirement because they believe it's more theater than precaution because people can test and then contract covid while traveling to their cruise.

The Current Cruise Protocols Work

Royal Caribbean President Michael Bayley does expect changes to come in his cruise line's covid protocols, and he talked about them during Royal Caribbean's recent President's Cruise, the Royal Caribbean Blog reported.

"I think pre cruise testing is going to be around for another couple of months," Bayley told passengers during a question and answer session. "We obviously want it to go back to normal, but we're incredibly cognizant of our responsibilities to keep our crew, the communities and our guests safe."

People do still get covid onboard despite the crew being 100% vaccinated and all passengers 12 and over being vaccinated, but the protocols have worked well when it comes to preventing serious illness.

Bayley said that the CDC shared some information with him in a call.

"The cruise industry sailing out of the US ports over the past 12 months and how many people have been hospitalized with Covid and how many deaths occurred from Covid from people who'd sailed on the industry's ships, which is in the millions," he said, "And the number of people who died from COVID who'd sailed on ships over the past year was two."

That success may be why the major cruise lines are reluctant to make changes. The current rules, even if they're partially for show, have been incredibly effective.

"Two is terrible. But but but against the context of everything we've seen, that's it's truly been a remarkable success." he added.

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International

Tesla Rivals Challenge Its Lead as Nio Sets Encouraging Record

Tesla’s rivals are not even coming close to producing and delivering EVs at the same rate as the Austin, Texas-based market leader.

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Tesla's rivals are not even coming close to producing and delivering EVs at the same rate as the Austin, Texas-based market leader.

Electric vehicle makers have been struggling over the last two years to produce and deliver cars, trucks and SUVs despite obstacles such as supply chain disruptions, semiconductor shortages and factory shutdowns caused by the covid pandemic.

The industry's leading EV manufacturer Tesla  (TSLA) - Get Tesla Inc. Report on July 2 said that plant closures at its Shanghai gigafactory in April and May and supply chain disruptions led to a smaller number of deliveries than expected in its second quarter ending June 30 with 254,695, which was 26.7% higher than the same period in 2021, but 17.7% lower than its record of 310,048 delivered in the first quarter of 2021. Analysts were originally expecting about 295,000 deliveries.

Tesla's production declined to 258,580 vehicles in the second quarter compared to 305,407 in the first quarter. It had produced 305,840 vehicles in the fourth quarter of 2021.

Tesla's rivals are not even coming close to producing and delivering EVs at the same rate as the Austin, Texas-based market leader. But they keep trying.

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Tesla Rivals Struggle to Produce and Deliver Volume of EVs

Tesla rival Nio  (NIO) - Get NIO Inc. American depositary shares each representing one Class A 蔚来汽车 Report on July 1 said that it had delivered 12,961 vehicles in June for a 60.3% year-over-year increase and its highest number of monthly deliveries ever. The company also reported 25,059 EVs delivered in the three months ending June 2022, increasing by 14.4% year-over-year. Nio has delivered a cumulative 217,897 EVs as of June 30.

NIO on June 15 rolled out its ES7, a new mid-large five-seat smart electric SUV, which is the first SUV product based on NIO's latest technology platform Technology 2.0. NIO also launched the 2022 ES8, ES6 and EC6 equipped with the upgraded digital cockpit domain controller and sensing suite, enhancing the computing and perception capabilities as well as digital experience of the vehicles. The company expects to start deliveries of the ES7 and the ES8, ES6 and EC6 in August.

Chinese EV maker XPeng  (XPEV) - Get XPeng Inc. American depositary shares each representing two Class A 小鹏汽车 Report on July 1 said it delivered 15,295 vehicles in June, a 133% increase year-over-year; 34,422 in the second quarter ending June 30 for a 98% increase year-over-year and 68,983 in the first six months of the year for a 124% increase year-over year.

The Guangzhou, China-based company said in August it will begin accepting orders for its new G9 SUV with an official launch in September.

Beijing-based Li Auto  (LI) - Get Li Auto Inc. Report on July 1 said it delivered 13,024 EVs in June, a 68.9% increase year-over-year and 28,687 in the second quarter ending June 30 for a 63.2% increase year-over-year. The company on June 21 began taking orders for its Li L9 SUV and recorded 30,000 orders as of June 24, according to a statement. Test drives will begin July 16 with deliveries beginning by the end of August.

GM Follows Behind Tesla and Other Rivals

General Motors  (GM) - Get General Motors Company Report had 7,300 EV sales in the second quarter, according to a July 1 statement. The Detroit automaker's sales included deliveries of the BrightDrop Zevo 600 delivery van, GMC Hummer EV pickup, and the resumption of the Chevrolet Bolt EV and Bolt EUV production.

GM said the Cadillac Lyriq production is accelerating, with initial deliveries in process. Orders for the 2023 model year sold out within hours and preorders for the 2024 model opened on June 22.

The company said it will gradually increase production of the Cadillac Lyriq and GMC Hummer EV Pickup in the second half of 2022. 

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Spread & Containment

Tesla EV deliveries fall nearly 18% in second quarter following China factory shutdown

Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s…

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Tesla delivered 254,695 electric vehicles globally in the second quarter, a nearly 18% drop from the previous period as supply chain constraints, China’s extended COVID-19 lockdown and challenges around opening factories in Berlin and Austin took their toll on the company.

This is the first time in two years that Tesla deliveries, which were 310,048 in the first period this year, have fallen quarter over quarter. Tesla deliveries were up 26.5% from the second quarter last year.

The quarter-over-quarter reduction is in line with a broader supply chain problem in the industry. It also illustrates the importance of Tesla’s Shanghai factory to its business. Tesla shuttered its Shanghai factory multiple times in March due to rising COVID-19 cases that prompted a government shutdown.

Image Credits: Tesla/screenshot

The company said Saturday it produced 258,580 EVs, a 15% reduction from the previous quarter when it made 305,407 vehicles.

Like in other quarters over the past two years, most of the produced and delivered vehicles were Model 3 and Model Ys. Only 16,411 of the produced vehicles were the older Model S and Model X vehicles.

Tesla said in its released that June 2022 was the highest vehicle production month in Tesla’s history. Despite that milestone, the EV maker as well as other companies in the industry, have struggled to keep apace with demand as supply chain problems persist.

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