We all like straight recommendations to buy stock, but sometimes just staying away from a sector is a very good call. This year, it’s been tough in the energy patch, and I’ve worked hard to make sure my calls were very focused and not sector wide, missing much of the latent disasters that have befallen various parts of the energy patch, particularly in mid-cap E+P players and in refining.
It is in refining where I want to look now to find a focused play that is riding one of these negative trends. The intensifying focus on “crude by rail” continues to hurt refiners but will greatly benefit some well-positioned MLP’s.
In the last several weeks, I’ve gone against the recommendations of the big energy traders at Goldman Sachs and Morgan Stanley and predicted that the spread between West Texas Intermediate (WTI) and Brent crude would continue to contract, moving finally under $10. That spread, if you’ve been reading my columns, has been largely responsible for the tremendous outperformance of the refiners in 2012 and early 2013, particularly the mid-con refiners, who have taken advantage of the low priced domestic crudes and the relatively high prices they could charge for refined products.
That’s been changing as the spread has slowly collapsed and we can see the relative weakness of the mid cons and other refiners in the last days – refining is not the place you’ve recently…