John Stephenson Andeavor ANDV-N TOP PICK Mar 05, 2008

Had a great ride in 2012. You have seen a short-term pullback in 2013 giving an opportunity to some of the buyers to have a good hard look at core capital growth, cash flow and earnings potential. Great growth story. Wonderful dividend.

An independent petroleum refiner. It is a very interesting dynamic in the refining industry in the US. There is all this oil and gas that needs to be refined and used. You cannot ship crude out of the US, but you can ship refined product. They have a low cost base for their product and are able to sell some product outside of the US. They are a beneficiary of low inflation and low cost pressure. They should be able to grow their earnings very nicely. Dividend yield of 1.83%.

They don’t own oil or gas wells. They buy petroleum and run it through their refineries. That has been a far better place to be as the price of oil has come down. These are very volatile stocks, however.

(Top Pick Sep 9/14, Up 70.49%) The boom in energy production leading up to summer of last year, favoured this kind of company because there was more demand than supply. When things have done well for a long term, people buy them cheaply. Oil production has become mass manufacturing. He thinks there will be a prolonged period of low energy prices for this reason. Gas prices did not fall as quickly as oil. Their input costs are a lot lower now.

SHORT. This basically hit a 52 week high last week and has started to turn down. Refiners go into a seasonal repair period starting roughly now and the majority demand for gasoline starts to drop off in the next few weeks. Also, lesser demand and lower grades of fuel are being produced that are less expensive. This company is very dependent on Western crack spreads, which have been very high and are starting to come down. Everything is starting to twist into lower valuations.

The drivers on earnings are crack spreads, which have fallen apart in the last few months. He would not be surprised if we got a shock to the downside if there is an earnings miss. Definitely don’t be long, but he would not short it because it could be a profitable energy play for a long time. He also never shorts single securities. He uses inverse ETFs.

(A Top Pick Aug 18/15. Up 26.62%.) *Short* He is now out of this name as he thinks things have leveled off. It had hit a 52 week high when he put the Short on, and the crack spread was incredibly high.