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TradingBlock provides investors regular market commentary and outlooks from market analysts and educators like Stutland Volatility Group, Dan Sheridan of Sheridan Mentoring, and TradingBlock's own market strategist Tim Biggam. Market analyst outlooks for individual stocks are entered into our... More
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  • For investors seeking value and yield, Valero offers both  0 comments
    Dec 21, 2011 4:06 PM | about stocks: VLO

    Tim Biggam, TradingBlock  (December 21, 2011, 3:05pm CST) 

    SymbolAnalyst Target PriceTarget Date
    VLO24.50June 15, 2012

    Valero Energy Corporation (ticker: VLO) is a petroleum refiner and marketer. As of December 31, 2010, it owned 14 petroleum refineries located in the United States, Canada and Aruba. Its refineries can produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products, as well as a slate of premium petroleum-based products. It operates in three segments: refining, ethanol and retail.

    Valero looks to be carving out a base at the 20 level, an area that has held over the past several months. The stock is also trading at a trough valuation, with a forward P/E of just over 5. The company also has over 5.00 per share cash, with a nearly 3% dividend yield. In the current low-growth equity environment, I favor value and yield over growth, and VLO fits the bill on both fronts.

    With a conservative estimate of $4.50 per share in 2012 earnings (consensus estimate: $4.85) and a multiple of only 5.5, I look for VLO to move back toward the 200-day moving average of 24.50 by June expiration.

    Play of the Day

    Based on Valero Energy Corporation's (ticker: VLO) current market price of $20.81 and using a target price of $24.50, a target date of June 15, 2012 and $1,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.  

    Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com.
    Powered by TradingBlock's TradeBuilder. 

    Strategy (click for details)% Return at TargetProbability of breaking 
    even or better
    Buy Jun Call Spread+146%51%
    Sell Jun Put Spread+86%60%
    Buy Jun Put Butterfly+76%65%
    Buy Stock+17%59%

     * Click link to access TradeBuilder details on TradingBlock.com. Must have Instant or Actual account. Subject to change due to changing market conditions.  Click here to view risks regarding selling stock short.

    DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services.

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