2015's Top Performers: Jim Powell

01/08/2016 10:00 am EST

Focus: ENERGY

Jim Powell

Principal Analyst, Global Changes & Opportunities

Last January, we featured our annual Top Picks report, highlighting the favorite stocks from the leading financial newsletter advisors. Here, we talk with one of 2015's top performers, Jim Powell, editor of Global Changes & Opportunities Report; his favorite investment for 2015-an oil refiner-rose over 40%.

Steven Halpern:  Our guest today is Jim Powell, global expert and editor of Global Changes & Opportunities Report.  How are you doing today, Jim?

Jim Powell:  I'm fine, Steve, and happy New Year to you.

Steven Halpern: The same to you.  In last year's Top Picks report, you chose Valero Energy (VLO) as your favorite idea for 2015 and the stock rose over 40% since your original recommendation. Could you tell our listeners what the company does and remind them about your rationale for originally choosing those shares?

Jim Powell:  Yes. Valero was in a position to actually benefit from the crash in energy prices, because as energy costs go down, users use more of it.  Ford was seeing its sales go way up.  

Motor home sales were way up and I realized that the independent refineries were going to have a pretty good year and Valero is one of the very best.  

It has 15 refineries. It's vertically integrated. It not only produces its own fuels, it also sells them through the Valero, and Diamond Shamrock, and Texaco brands, so I felt pretty confident that if oil prices stayed low, Valero would have a good year and that's the way it turned out.  

Steven Halpern:  Now, the stock has been a spectacular performer as I mentioned, gaining over 40%.  Other than the background of oil prices, were there any other developments that occurred over the past year that would account for this stock's performance?

Jim Powell:  I would attribute almost all of it, Steven, to the lower oil prices and increased consumption by consumers.

Steven Halpern:  So, looking out to 2016, what do you see on the horizon for both oil prices, and in turn, for Valero?

Jim Powell:  I think Valero will have another good year. I think the big spectacular jump in its stock price will probably not be duplicated because investors now know that the outlook is good and the priced it accordingly.

As for oil prices, by all accounts they are likely to stay low, but I would caution people that we could see that change overnight.  

The situation in the Middle East is quite volatile. In addition, Saudi Arabia cannot sustain-in my opinion-cannot sustain the high production rates it has now in order to keep prices low and hurt the shale oil producers.  

Saudi Arabia, for the first time in a very long time, is actually borrowing money to pay its social services obligations.  I think we could see a real upside surprise in oil prices in 2016.  That without.but, if we don't have those kinds of shocks, then I think oil will stay low.

Steven Halpern:  So, for investors who followed your advice to buy Valero Energy earlier in 2015, would you still recommend holding and what would be your view for new investors who would be considering buying this stock?

Jim Powell:  I don't think I'd buy it new because I think the good news is basically well known about Valero, but I would hold what I have now and put a trailing stop on it just in case there's some sort of a negative surprise.

Steven Halpern:  Again, our guest is Jim Powell, editor of Global Changes and Opportunities Report. Thank you for your time, today.  

Jim Powell:  You're welcome, Steve.

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