PULLBACK BUYS

Valero Energy (VLO) is one of our PB picks.

Now, we had no intention of listing two energy stocks in a row since our last blurb was about MRO, but given the recent developments with the U.S. decision to start exporting oil (condensates), a move some think could force VLO to pay  more for its crude, why not?

The U.S. has prohibited the export of oil since the Arab embargo in 1975. For those who don't recall, it caused long gas lines at the pump and more than a little irate behavior. Some states even had assigned days based on one's license plates when you could legally gas up. And topping off became a new term in the lexicon of American drivers.

So here's just three historical facts--911, the Arab embargo and FDR's confiscating gold--that should warn you anything can happen at any time. And that ought to signal a basic truth in this dimension that never changes: The only person, place or thing you can count on is a simple three-letter word--you. We realize such is anathema to the bureaucrats and politicos who count on you counting on them.

Valero fell last week 8.3% on the news. The largest independent U.S. refiner, Valero profited nicely from the recent shale boom, lowering prices for gas and oil and pushing up the bottom line of refiners. Another way of putting it is, it's all about spreads and margins.

Some investors believe this is the oil-export camel's nose under the edge of the tent. And it won't be long before more party crashers show up seeking more profits. In our view, however, much of the concern is another example of going to the show before you get there.

Valero trades at a decent price per forward earnings, pays roughly a 2% dividend and has some other goodies to recommend it to the patient and prudent. So it remains on our pullback list when the pullback--and it will--arrives.