GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
Marathon Petroleum looks expensive against its earnings. It trades at 15x trailing earnings when oil and gas producers usually get 10x, putting fair value at $239.59-$304.93 on 10x mid-cycle EPS of $28.21, give or take 12%. Trailing and forward earnings differ by 69%, and $259.65 marks a pullback level. This is a levels-only read off reported earnings and estimates, with no fundamental work. x.com
Refiners such as Valero and Marathon Petroleum may be nearing a top, because the cure for high prices is always high prices. The stocks have made monster moves as crack spreads blow out and foreign buyers fight for distillate capacity. x.com
Shell's stronger refining profits and larger buyback support the view that its breakout holds. Q3 adjusted earnings reached $10.8 billion versus $9.9 billion expected, as refining margins hit a record $42 a barrel; the three-month buyback rises from $3 billion to $5 billion. Those margins will not last forever. x.com
Marathon Petroleum's earnings are impressive at $17 a share, and Q3 should be better. The open question is whether it can reach $25 a share and sustain that for a few quarters. x.com
Occidental Petroleum is mispriced at about 8.4x trailing earnings and an 8.7% free cash flow yield during an oil shock. Eight times earnings in an oil shock is not a valuation but a clerical error with a ticker symbol. Iran cannot beat the US Navy, so it is waiting out America's vote in 49 days, since Iran does not vote until 2028; owning Occidental beats hiding in Treasuries. x.com
Par Pacific Holdings, a refiner, is a new addition as the portfolio itself gets refined. x.com
Low forward earnings multiples alongside strong investor sentiment put these S&P 500 stocks atop the smart-value ranking. APA, Viatris, EOG, Marathon Petroleum, Valero, Phillips 66, Allstate, Diamondback, Everest and Centene trade at 6-15x forward earnings after one-year gains of 17-150%; the accompanying ranking also weighs free-cash-flow yield and momentum. x.com
EQT, Range Resources, Expand Energy, Magnolia Oil & Gas and EOG Resources are cyclicals catching an earnings tailwind before the crowd notices, the setup Peter Lynch loved. They passed a screen alongside Coterra, all natural gas or oil producers with disciplined balance sheets and forward P/Es of 9-12. x.com
US energy stocks are being steadily accumulated after a 17-year base, and that base will not resolve in a month. The sector broke out this year and pulled back on contracting volume, which is digestion, not distribution. Energy trades near 13x earnings versus about 20x for hyperscalers. Stocks now rise with oil and get bought back when oil falls. Tech is priced for the cost of capital to come down; energy for the reason it will not. x.com x.com x.com
Refiners Marathon Petroleum, Valero and Phillips 66 are back at the top of S&P 500 momentum rankings as earnings surge. The three earned a combined $12.6 billion in Q2, the most since Russia invaded Ukraine in 2022, with Marathon and Valero scoring 100 on momentum and Phillips 66 scoring 99. x.com
PrimeEnergy trades around 6x normalized earnings because its reserve life is a huge unknown: about five years of proven reserves plus three more years of identified drilling, with little visibility beyond. It will probably outperform that long term, but near term it is mostly oil beta, with intermittent, unpredictable alpha. Better gas pricing once more takeaway capacity is online would help, since it gets only $0.75 for natural gas, and liquids output nearing 2 million barrels de-risks opex. … Show more
