Did You Buy These Top Performing Energy Stocks in 2012?
Shas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Energy stocks are perennial favorites for any seasoned investor. While, like any other, this sector has its share of bad apples, the relative inelastic demand for its products and services makes energy stocks quite reliable. Within the energy sector, you may choose to invest in oil & gas companies or solar energy outfits to suit your investment horizons and goals. However, energy stocks have their own set of issues, ranging from fluctuating prices to the introduction of new and yet to be proven technologies. But year 2012 taught us that with careful planning and analysis, you can land some good gems to provide you solid returns. Here is my list of top performing energy stocks for year 2012.
Marathon Petroleum (NYSE: MPC): The stock had a good run in 2012 with 97 percent appreciation in its price. Currently, it is in a bullish phase, which is likely to continue well into 2013. This independent oil refinery company signed a new deal with BP, under which it will acquire BP’s Texas City. Marathon Petroleum will also get a part of BP’s retail and logistics network in the southeast. The company will pay a hefty $2.5 billion for the deal, but it is likely to yield equally lucrative results as its capacity is doubled following the new acquisitions. However, this is not all. December also saw BlackRock upping its stake in the company; the investment firm already held a 7.4 percent share, and now its stake is above 10 percent. It is highly likely that BlackRock will let the company pursue its own plans without playing the role of an activist investor. Marathon Petroleum came into existence this year, after being spun off from its parent company Marathon Oil. In the coming years, it is expected to concentrate on refining operations, without any encumbrance from upstream operations like exploration and drilling. At the very same time, refinery operations are generally considered to be more risky and the company would not have the benefit of diversification of risk. However, the company has a robust capital base of $21.35 billion, and its stock is trading at a P/E of 8.56.
Valero (NYSE: VLO): Valero Energy is yet another refining company that made good returns this year. The company is also a front runner in its category and is expected to remain strong in the coming year as well. Its strong capital base of $18.84 billion and good dividend yield of 2.10 percent make it a strong candidate for inclusion in any portfolio. While the stock managed about 66 percent capital growth this year, it is likely to grow further in 2013. The company is one of the top defense contractors in the country. It is likely to win lucrative defense deals in coming years, as its main competitor BP is now out of contention, owing to its oil spillage fiasco. Defense deals will certainly provide the company with good growth trajectory in the future. On the other hand, the company may be subjected to stringent environmental laws, which may have a negative impact on its profitability. However, keeping in view Valero’s robust liquidity position and bright future prospects, we are bullish about this refining outfit.
Tesoro (NYSE: TSO): Credit Suisse recently upped its rating for the stock from Neutral to Outperform. Tesoro certainly has the track record to back up any such assertion, as it provided a shade more than 100 percent return to its investors in the current year. The stock is currently in the vicinity of $45, and Credit Suisse expects it to leap to $60 in the coming months. Tesoro also elicits interest from institutional investors, as shown by various block deals carried out in the past few months. The company expects to spend $455 million on CapEx in 2013 and is also looking to maintain a healthy cash balance. In order to augment its capacity, the company recently acquired Chevron Pipe Line Co's Northwest Products System. The deal was entered into through its affiliate Tesoro Logistics LP. The new deal will help the company in expanding its operations in the western part of the country. The stock is currently trading at its 52 week high and seems to be in a bull phase. Given the rosy outlook, any pullback can provide you with a good entry point.
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