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 Time to Check Out Oil Refineries

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Houston Oil Trading Center

U.S. oil production is rising steadily just as consumers are switching in droves from economy sedans to light trucks and SUVs. Combined, those trends translate to higher gasoline sales. That’s why analysts are forecasting good times ahead for U.S.-based oil refineries.

Although many refinery stocks have already moved up in price, analysts are forecasting record earnings for at least the next two years. So there’s still time to get in on the action. Nevertheless, given the circumstances, I’ve emphasized minimizing risk when designing the screen that I’m about to describe. As usual, I’ll use the FINVIZ free stock screener to show you how to find refinery stocks worth considering.

FINVIZ Stock Screener

Find the screener from the FINVIZ homepage (https://finviz.com) by selecting Screener. FINVIZ calls its selection parameters “filters.” On the Filters bar, select “All” to display the available filters. Then, for the filters that you want to use, click on the associated dropdown menus to select from the available filter values.

Establish Refinery Database

Since the positive conditions mentioned above pertain specifically to U.S. refineries, start by using the “Country” filter to limit your list to U.S. stocks. 

Then use the “Sector” filter to specify “Basic Materials” and the “Industry” filter to narrow your list to “Oil & Gas Refineries.”

Market-capitalization is the value of all of a firm’s outstanding (issued) shares. Market-capitalizations can range from a few million to billions of dollars. But, the smaller the stock, the higher the risk. So use the Market-Cap filter and specify “+Mid,” to limit your list to Mid-cap ($2 billion) or larger stocks.

Working Smarter – Not Harder

Rather than getting out your calculator and donning green eyeshades to analyze financial statements, it’s easier to let large investors such as mutual funds and banks to that heavy lifting. Do that by using the Institutional filter and specifying “over 40%” which rules out stocks that the “smart money” doesn’t like.

Continuing the “work smarter” theme, specify “buy or better” using the Analyst Recommendation” filter to preclude stocks that professional stock analysts aren’t recommending buying.

Minimizing Risk

Next, specify “over 400K” using the Average Volume filter to avoid stocks trading less than 400,000 shares daily, which are riskier than higher volume stocks.

Finally, using the Beta filter, specify “under 1.5.” Beta is a volatility measure. Considerable research has found that the higher the beta, the higher the risk.

Refinery Candidates

My screen turned up four U.S.-based refiners worth researching, but one recently agreed to be acquired.

•  Andeavor (ANDV): Headquartered in San Antonio, Texas, Andeavor owns 10 refineries and more than 3,000 gas stations. Pays 1.9% dividend yield. In April, Andeavor agreed to be acquired by Marathon Petroleum (see below), so check out MPC rather than ANDV.   

 Detek US Holdings (DK): Headquartered in Brentwood, Tennessee, owns six refineries, crude oil and refined product pipelines, and 300+ retail store/gas station combinations. Pays 1.7% dividend yield.

•  Marathon Petroleum (MPC): Headquartered in Houston, Texas, Marathon owns six refineries in the U.S. Gulf Coast and Midwest regions. Also owns petroleum pipelines, marine transportation facilities, terminals, storage facilities, etc. Pays 1.1% dividend yield.

•  Valero Energy (VLO): Headquartered in San Antonio, Texas. Valero owns 15 oil refineries in the U.S., Canada, and the U.K. and 11 ethanol plants in the central U.S. Pays a 2.9% dividend yield.

As always, consider the results to any screen to be candidates for further research, not a “buy” list. The more you know about your stocks, the better your results.

published 5/15/18

 

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