Crack Spreads III

Tesoro (TSO 64.48) was up 7.48 on Friday, and up 18 points in a month since I mentioned it on September 27, on my piece "Crack Spreads." I highlighted the refiners again on October 10th. What caused it to move? Wall Street foolishness!

You had a shrinking of the crack spread margin, so Wall Street dumped these stocks, even though it was only a temporary situation. The enterprise valuation of TSO and Western Refiners (WNR 38.15) is substantially greater than their stock prices. But Wall Street didn't care. Maybe now they will.

90 year old young Kirk Kerkorian, who is worth $18 billion, decided to tender for almost 22 million shares of TSO at $64. If successful, he'll own 27 million shares.

If you missed TSO, look at WNR. The enterprise valuation of this stock exceeds 60, but it trades at 38? Give me a break. On October 10th, I said this:

TSO rallies next as it's a relatively cheap refiner with market rumours of a takeover, and WNR is the last to rally because it's hated by the street. And paradoxically, the stock loved the least, WNR is poised to rally the most, showing that in Wall Street, as in life, "the last shall be first."

It still stands. Let me be clear. If you followed this blog, in one month you got 18 points in TSO, and now you have the chance to get the same in WNR.

It's your choice.