An Energy Merger Creates Opportunity

10/20/2006 12:00 am EST

Focus:

Keith Fitz-Gerald

Editor, High Velocity Profits and Total Wealth

Keith Fitz-Gerald is an exceptional advisor and professional trader with a safety-first focus on defensive portfolio management. Here he offers investors a way to participate in the energy market while minimizing risk…

"I want you to consider fleshing out your energy holdings with Western Refining, Inc. (
WNR NYSE). The company refines 116,000 barrels of crude per day, which makes it a small animal in the refining sector. Its size also makes it a perfect target for acquisition by one of the major players. In fact, part of the reason for my interest in WNR stems from its recently announced merger with Giant Industries, which will create the fourth-largest publicly traded independent refiner and marketer in the U.S. The merger will increase its daily production capacity 84% to approximately 216,000 barrels a day. Not only does this merger make great business sense, but it also puts the company on many analysts’ radar screens. The merger will expand Western's reach from El Paso, Texas, to the entire Southwestern region as well, as further diversify the company's product line-up. The deal is expected to close in the fourth quarter of this year, and I will keep you updated on its progress.

"Western Refining has top-line sales of nearly $4 billion and has seen one of the best quarterly revenue growths in the industry at 46.2%, which is well above any of its competitors. Up to this point in time, the company has maintained zero debt, so it is likely to be a solid performer even if the going gets tough, rates rise and we face continued inflationary pressures. What's more, WNR has cash on hand equal to $2.68 per share or more than 10% of its share price.

"The company pays a very small dividend, but that’s not why I want you to invest in it. The reason is simple - there is a very bright future for this domestic manufacturer, and I just want you to take advantage of the bargain basement prices the market is offering us presently. I suggest you divide your purchase in half to keep risk low. Buy half of this Boomer and Zoomer now at the market and the other half at $20.50 or lower.

"If there is ANY hint of a pending hurricane or a renewed war effort in the Middle East, go ahead and buy the second half at the market as well. This stock has the potential to triple over a short one- to two-year time frame, either for its business acumen or because it becomes a takeover target by the majors."

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