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(B)(N) The Refiners – Andeavor, HollyFrontier, and Valero

September 14, 2017
Refinery

The Refiners

Drama. Oil is plentiful and much cheaper than the fresh water that we might buy at forty gallons to the barrel at the store, but the price of gasoline and other fuels at the pump is turned-up to full throttle by the refiners who have a limited and expensive capacity to produce fuel and still further by taxes and delivery at the pump. The current supply might also be affected by the hurricane damage this year, but the demand for it, pending a global movement towards electric cars, will not (Bloomberg, September 11, 2017, China’s Push Into the Electric-Vehicle Market).

Sack of Hammers

The Hammer Multiplier

The consequences of these simple equations are not lost on the stock market which likes to hammer on what it thinks it understands – $2.50 a gallon today, buddy, and going up – and these three stocks are also substantially owned by the institutions and mutual funds and, so, the response to the quarterly earnings reports is just another knee-jerk in that market.

For example, the average quarterly, more specifically, the three-month rolling return for the last five years rolling forward one month at a time and evaluated three months later, was 3.8% but it depends a lot on which month they rolled because those returns varied between (-27%) and +42% with a shocking regularity for the same companies reliably doing the same thing for the same consumers every day; please see Figure 1 below for more details (and click on it and again to make it larger as required).

Figure 2 The Refiners - Fundamentals

Figure 1: The Hammer Multiplier

The Hammer Multiplier

The Hammer Multiplier

But were it not for the stock market and the prowess of these investors with their hammers and your money, we’d have to be satisfied with a target dividend yield of 3.3% and a payout rate of 72% this year on reduced earnings.

But it’s because of these investors and their hammers which they actually call a “theory” (sic), and your money to add value to them, that we’re getting 30% a year for the last five years with no capital risk at all due to the “Hammer Multiplier” which wants to shape the market their way regardless of the facts.

And our interest in these companies is now free three times over at +330% in five years and it’s always better when the market loses its grip now and then, and it probably will, based on the “Hammer Principle” which we’ll leave for you to name and figure out – ask your broker or the guys who claim to be managing your pension fund; please see the illustrations below for a heads-up on when.

The Hammer Multiplier

Figure 3 The Refiners - (B)-Class Portfolio

Figure 2: The Refiners – (B)-Class Portfolio

Figure 4 The Refiners - Risk Price Charts

Figure 3: The Refiners – Risk Price Charts

For more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class actionLa Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in AmericaBig OilShopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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