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U.S. funds jumping into Tesoro, Valero in battered energy sector

Oct. 09, 2015 5:56 PM ETAndeavor (ANDV) StockVLO, ANDVBy: Carl Surran, SA News Editor16 Comments
  • Refinery stocks Tesoro (TSO) and Valero (NYSE:VLO) are shining stars in an otherwise gloomy energy sector picture - up a respective 70% and 43% Y/Y, vs. a 21% loss for the S&P 500 Energy Sector Index - and mutual funds are piling in.
  • Falling oil prices often benefit refiners because they purchase crude as a feedstock for their refineries which produce valuable fuels such as gasoline and diesel, but portfolio managers say another reason they like the sector is that the management teams at top U.S. refiners have become disciplined about their capital spending plans and are returning more cash to shareholders.
  • The number of actively managed mutual funds investing in VLO and TSO surged by a respective 32% to 319 and 20% to 210 this year, with the number of funds holding both companies rising 31% to 151, according to Lipper.
  • But Arthur Barry, portfolio manager of the Loomis Sayles Value Fund, says he is worried that VLO's strength has attracted momentum money, fearing that "when things turn, they'll flee the stock."

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