Back to top

Image: Bigstock

Here's Why Hold Strategy is Apt for Valero (VLO) Stock Now

Read MoreHide Full Article

Valero Energy Corporation (VLO - Free Report) has gained 11.1% in the past year, outpacing a rise of 6.2% of the composite stocks belonging to the industry.

What’s Favoring the Stock?

Valero, currently carrying a Zacks Rank #3 (Hold), is a best-in-class oil refiner involved in producing fuels and products that can meet the demands of modern life. Its refineries are located across the United States, Canada and the U.K. A total of 15 petroleum refineries, wherein Valero has ownership interests, have a combined throughput capacity of 3.2 million barrels per day.

The Renewable Diesel business segment of the firm comprises Diamond Green Diesel (“DGD”) — a joint venture between Darling Ingredients Inc. and Valero. DGD is a leading renewable fuel producer in North America. Low-carbon fuel policies across the globe primarily are aiding the demand for renewable diesel, therefore driving Valero’s Renewable Diesel business unit.

Valero boasts that its premium refining operations are resilient, even when the business operating environment is carbon-constrained. Its refining business has the capabilities to generate handsome cashflows that will allow it to return capital to shareholders and back growth projects.

Risks

However, rising operating expenses are hurting VLO’s bottom line. Being a premium refiner, the firm’s input costs are highly fluctuating, given the volatile pricing scenario of crude oil.

Stocks to Consider

Some better-ranked players in the energy space are Evolution Petroleum Corporation (EPM - Free Report) , Profire Energy, Inc. (PFIE - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) . Evolution Petroleum and Profire Energy currently carry a Zacks Rank #2 (Buy), and Helix Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Through its ownership interests in onshore oil and natural gas properties in the United States, Evolution Petroleum is touted as a key independent energy player.

Profire Energy is mainly focused on the oil and gas industry’s upstream, midstream and downstream transmission segments. PFIE has boosted that its legacy business is doing extremely well, thanks to the resumption of maintenance work of exploration and production players.

Helix Energy is a leading player and is well-poised to grow in the favorable crude pricing environment since it primarily provides specialty services to the offshore energy industry.

Published in