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Murphy USA: A Rare Long Term Growth Opportunity With A Tight Stop

My trading background and experience means that, in general, when I am looking for recommendations and interesting stock picks in the energy sector I am focused on value. Undervalued stocks represent the best opportunity for a relatively fast profit. Growth potential, on the other hand, can take time to play out. That said though, every portfolio should contain some long term investments in companies positioned for growth.

In the past few months, as the energy sector as a whole has caught up with the broader market in terms of valuation, finding cheap stocks has become increasingly difficult. It is not that there isn’t value in the sector; it’s just that individual opportunities that scream value have become increasingly rare. My attention, therefore, has turned more towards companies that have long term growth potential, such as Murphy USA (MUSA).

If you aren’t aware, Murphy USA is a retailing and refining business that was spun off from Murphy Oil last year. The bulk of their business comes from the agreement to provide gas stations and convenience stores at or close to Wal-Mart locations in the US. They currently operate over 1100 stores in 23 states and reported EPS of $0.21 on revenues of over $4 Billion last quarter. Based on consensus expectations for the next year’s profits the stock currently trades at a forward P/E of around 17.5. This isn’t cheap, but nor is it excessive; MUSA looks fairly valued. They do, however, have potential for long term growth.

This…




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