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Does the Recent Drop in Refining Stocks Represent an Opportunity to Reload?

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Posted on Fri, 15 March 2013 20:13 | 0

During the week, I’ve been appearing on television talking about a rapidly rising gasoline price at the pumps caused by an out-of-control program at the Environmental Protection Agency designed to boost the levels of renewable fuels. I appeared on Bloomberg TV, Fox Business Network with Melissa Francis and at TheStreet.com with Jim Cramer, talking mostly about the trajectory I thought gas prices could take given the upcoming summer driving season. 

But what about the refiners whose margins are being squeezed by this EPA program? 

Investors are interested in possible opportunities there, even more-so it seems than with a rising pump price. 

The sector has taken a dive over the last two days, dropping a few percentage points in a rising overall index, somewhat bringing down the high-flying share prices of huge momentum plays like CVR Energy (CVI), Tesoro (TSO), Valero (VLO), Marathon Petroleum (MPC),Holly Frontier (HFC) and Western Refining (WNR).

Since these stocks have been some of the best performers for 2013, the question is: Does this moderate drop represent an opportunity to reload? I say no. 

Chasing the refinery stocks through their massive rise this year has been difficult, if not impossible, to time correctly. I recognize the enthusiasm that goes with momentum stocks that are on a run like these, and important fundamentals we have often discussed are driving them. But, as a sector, these prices are far ahead…

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