Don't believe for a second that those sectors are bursting bubbles. As long as we continue to live in a world of growing populations and economies, and scarce (i.e. less than infinite) amounts of raw materials and resources, commodities and energy are a fairly straightforward long-term investment thesis.
Tesoro (TSO) is an oil-refiner whose stock has fallen from an all-time high of $64 in October 2007 to its current price of $25. It is suffering from a tightening in refining margins, otherwise known as the "crack spread" (a term which I just can't use with a straight face), due to the current high price of oil. However, Tesoro's stock is poised to rebound should any of the following events occur:
- Oil prices go down, or even sideways (not terribly likely, but possible)
- Gasoline prices go up (very likely)
- An integrated oil company who wants more refining capacity, or oil explorer/driller who wants to become an integrated, buys out TSO (long-term likely)
Tesoro has a market-cap of just $3.5 billion, so it could easily be bought by any number of cash-rich energy companies. It is also trading at a low forward P/E of 6 and PEG of 0.64, representing tremendous value. Meanwhile, it yields a dividend of 1.5% while investors like myself wait for the turnaround.
Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.
Dominion Resources Black Warrior Trust (DOM) 11.84%
Southern Copper (PCU) 11.55%
Fording Canadian Coal (FDG) 10.22%
Goldman Sachs (GS) 7.47%
Google (GOOG) 6.67%
Apple (AAPL) 5.71%
Tidewater (TDW) 5.22%
Terra Nitrogen (TNH) 5.06%
Apache (APA) 4.43%
Capstone Turbine (CPST) 4.37%
Frontline (FRO) 4.18%
American Capital Strategies (ACAS) 4.04%
Foster Wheeler (FWLT) 4.00%
Companhia Siderurgica Nacional (SID) 3.48%
NVIDIA (NVDA) 3.36%
MEMC Electronic Materials (WFR) 3.00%
Tesoro (TSO) 2.85%
Ace Limited (ACE) 2.47%
