Valero Energy Corp: A commodity stock for your 2013 Portfolio
Valero Energy Corporation (NYSE: VLO), through its subsidiaries, is an international manufacturer and marketer of transportation fuels and petrochemical products. The company is the most geographically diversified independent domestic refiner in the US, and is ranked second among the top companies to serve as major suppliers for the U.S Military.
Over the past year, Valero shares have jumped more than 60%, greatly exceeding the performance of the broader market index. The strengths that this company exhibits greatly justify their solid stock performance. Based on forward looking fundamentals the company is expected to do quite well in 2013.
Market IQ Pro Metrics give VLO an Outperform Rating. VLO’s fundamental stock Quality is better than 68% of the companies in its peer group. The company is financially strong with numbers better than 75 % of its peers.VLO is also relatively cheap when compared to its peers and has great value potential as shown below.
The company’s strengths lie in several areas such as efficiency in cost control, revenue growth, strong balance sheet and good operating cash flow. Additionally, Valero also provides favourable dividend with an annual dividend yield of 2.09%.
From a technical perspective Valero looks promising and is likely to continue its bullish trend. The stock broke above its daily resistance of $34.35 on January 2, 2013 making new highs for the year. Currently, the stock is holding above this area and closed at $34.67 on January 8, 2013 as shown below.
The company was named to Bank of America (BAC)/Merill Lynch’s Top 10 Investments for 2013 - this news bodes well for Valero. In addition, there are several other positive catalysts that should help drive their share price higher.The resolution of the fiscal cliff in particular is good news for Valero given its strategic placement in competing for defence contracts. Their solid business model, strong quantitative metrics, and substantial growth prospects suggest that the company will continue to perform well and presents a good investment opportunity.
Commentary by:
Fahad Kamr, CFA
Adil Yousuf
www.themarketiq.com
info@themarketiq.com
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This commentary is for informational purposes only and does not constitute investment advice. The opinions offered herein are not recommendations to buy, sell or hold securities. Market IQ expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.
