Comments on: Insane Valuation Case Study: Valero Energy

By: Transcripts : Valero: Too Good to Be True?

Transcripts : Valero: Too Good to Be True? — Wed, 24 Dec 2008 12:39:39 +0000

[...] we’re looking for is satisfactory margin of safety. On a final note, I have to give credit to Chad Brand at Peridot Capitalist for getting me interested in this [...]

By: Rex Tillerson : Valero: Too Good to Be True?

Rex Tillerson : Valero: Too Good to Be True? — Wed, 24 Dec 2008 12:38:12 +0000

[...] we’re looking for is satisfactory margin of safety. On a final note, I have to give credit to Chad Brand at Peridot Capitalist for getting me interested in this [...]

By: Seeking Alpha : Valero: Too Good to Be True?

Seeking Alpha : Valero: Too Good to Be True? — Wed, 24 Dec 2008 12:13:42 +0000

[...] we’re looking for is satisfactory margin of safety. On a final note, I have to give credit to Chad Brand at Peridot Capitalist for getting me interested in this [...]

By: Business & Finance Blogs » Blog Archive » Valero: Too Good to Be True?

Wed, 24 Dec 2008 09:55:23 +0000

[...] we’re looking for is satisfactory margin of safety. On a final note, I have to give credit to Chad Brand at Peridot Capitalist for getting me interested in this [...]

By: The Curious Investor » Blog Archive » Valero: A valuation almost too good to be true

Wed, 24 Dec 2008 01:21:38 +0000

[...] we’re looking for is satisfactory margin of safety. On a final note, I have to give credit to Chad Brand at Peridot Capitalist for getting me interested in this [...]

By: Chad Brand

Chad Brand — Thu, 30 Oct 2008 15:53:00 +0000

Dan,
I’m not going to insist predicting normalized earnings for refiners is an easy task, especially in today’s energy markets. I think $8 in VLO earnings (the peak) is too high. I agree with you that a $4 run-rate in these times is very reasonable (you’ll notice I picked $6 EPS as normalized, right in the middle). But even if VLO can only earn $4, how much downside could there be (in a rational market over the long term) when the stock trades at $17 today and tangible book value is all the way up at $27? I like the risk/reward trade-off, personally.

By: Dan

Dan — Thu, 30 Oct 2008 15:37:00 +0000

Do you think that run-rate annual EPS of $6.00 per share is really achievable? This seems above that of even the most optimistic analysts. I realize that sell-side research is to be taken with a grain of salt, but headwinds in the refining market seem to point to a more extended down cycle. Gasoline crack has fallen to negative at the beginning of this quarter. And, many believe that distillate margins will soon follow suit. Lower oil prices should help minimize the length of any contraction, but is there downside potential in VLO assuming a fall to a run-rate annual EPS more in the $4.00/share range? Do you believe that VLO offers a truly good margin of safety at these levels given potential for ongoing challenges in the refining industry.

By: Chad Brand

Chad Brand — Thu, 30 Oct 2008 12:18:00 +0000

Could not have said it better myself, shepherd.

By: shepherd

shepherd — Thu, 30 Oct 2008 02:55:00 +0000

Thanks for the answer, I think the previous comment expresses one sort of sentiment that value investors have to ignore in times like these. It’s incorrect to assume there must be a rational reason for the rise or fall of a stock in a time like this. There may be, but not necessarily so. The more likely scenario is that with so many people dumping their funds willy-nilly, there are some real pricing inefficiencies out there. I’m hoping for you that VLO is one of ‘em.

By: Anonymous

Anonymous — Wed, 29 Oct 2008 15:35:00 +0000

Well there must be another crucial component as we can see VLO dropping way faster than the oil prices…