Wednesday, November 30, 2011

HollyFrontier (HFC) 2011 Review

HollyFrontier Corp (HFC), which is the result of a merger of Holly Corp and Frontier Oil in July 2011, is one of the largest independent petroleum refiners in the US producing gasoline, diesel, jet fuel, asphalt and specialty lubricant products.

Consolidated historical figures are not yet available; however, earnings per share are expected to grow from $5.50 this year to $5.75 in 2012 while the dividend per share should increase from $.33 to $.38. Return on equity in 2011 will be roughly 60%. HFC should benefit from:

(1) economies of scale from its expanded infrastructure,

(2) its access to growing regional and Canadian supplies of crude oil,

(3) cost savings from the merger.

FTO is rated B++ by Value Line, has a 47% debt to equity ratio and its stock yields 1.0%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
HFC 1.0% 15% 7% NA*
IND 3.6 6 32 NA
Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
HFC 47% 61%

7% B++
IND 14 18 NA 7 NA

• historical numbers not available


Note: HFC stock made great progress off its November 2008 low, quickly surpassing the down trend off its July 2007 high (straight red line) and the November 2008 trading high (green line). The stock is in a long term trading range (blue lines). It had been in an intermediate term up trend (the recovery off the November 2008 low). However recently, HFC not only failed to hold the lower boundary of that up trend but also its initial support level (black line). The wiggly red line is the 30 day moving average. The Aggressive Growth Portfolio owns a one half position in HFC. However, that is down from a full position--when the stock broke the two aforementioned support levels, the Portfolio sold shares. Shares would be bought back on a trading basis at $12-13 level. The lower boundary of its Sell Half Range is $36.