|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Valero Exiting the Retail Business
Posted by: Valuentum Securities (IP Logged)
Date: October 2, 2012 10:50AM
Oil refiner Valero (VLO) plans to exit the retail business by auctioning off its gas station and convenience stores segment. The segment consists of nearly 1,000 locations in the U.S. and nearly 800 in Canada. The auction could fetch as much as $3.5 billion, as private equity firms and major convenience stores loom as the likely bidders, Bloomberg reports.
We’re actually a bit surprised by the move, but we think it has some interesting consequences. Traditionally, gas stations have provided a natural buyer and channel for refined gasoline, especially during times of weak demand. However, we think this move signals Valero’s confidence that the refining business doesn’t need the predictable earnings stream and distribution network of gas stations to balance its highly cyclical nature. Demand for petrochemicals, lower natural gas costs, and the resurgence of the domestic oil industry may be leading to higher trough period margins for the industry.
Though there aren’t many synergies between running a refinery and running a convenience store, we like the ability to distribute gasoline through an established channel. We’re also fans of the strong earnings that result from the convenience store business model. In other words, we’re not very excited by its plans to pursue the auction.
We’ll continue to monitor new developments, but at this time, we believe Valero’s shares are fairly valued. Our favorite name in the space is Phillips 66 (PSX), which we received in the portfolio of our Dividend Growth Newsletter when it was spun off from ConocoPhillips (COP).
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.