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Valero Energy
Valero Energy
Rank: 16   Ticker: VLO   Market value: $37 billion
WHY IT'S HOT: Recognizing the yawning gap between the cost of building a new refinery and how the market was pricing existing ones, Valero founder Bill Greehey went on a buying spree in the late 1990s, building Valero into the nation's largest independent refiner. It proved to be a brilliant strategy. No new refineries have been constructed in the United States for 30 years, and the existing facilities are operating at or near full capacity.

CHALLENGES AND OPPORTUNITIES: With gasoline prices around $3 a gallon and interest rates rising, cash-strapped consumers may finally cut back on their driving. Yet, while Valero can't produce much more gasoline than it's now making, it's in a good position to make more money on each gallon sold. That's because Valero specializes in refining "heavy sour" crude at a time when heavy oil trades at a discount to the easier-to-refine "light sweet" variety.

STOCK OUTLOOK: At its recent $60, Valero stock trades at a P/E of only seven (vs. nine and 12 for rivals Sunoco and Frontier Oil). One reason for that discount is that investors think Valero could do a better job controlling costs. Chi Chow, an analyst with oil and gas investment firm Petrie Parkman & Co., thinks incoming CEO Bill Klesse will prove more shareholder-friendly than Greehey by keeping down costs better, selling underperforming assets and undertaking more share buybacks. Were the market to reward Valero with a P/E of just nine, that would translate to a stock price of $82 (a 37 percent gain) based on projected 2006 earnings.
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2012 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2012 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2012. All rights reserved. Most stock quote data provided by BATS.
© 2012 Cable News Network. A Time Warner Company. All Rights Reserved. Terms under which this service is provided to you. Privacy Policy. Ad choices .