Building refinery exposure: Frontier Oil (FTO) and Western Refining (WNR)

The refinery stocks are not really buy and holds in my book, but excellent trades 2-3x a year. Their value ebbs and flows with the 'crack spread' - which is essentially the difference between crude prices and gasoline prices. There is a small host of companies to play in this sector, including Valero Energy (VLO), Tesoro (TSO), Frontier Oil (FTO), Western Refining (WNR), and Holly (HOC). Western Refining seems to be the favorite of traders and the most volatile (and most highly valued), while Valero is the Microsoft of the space, if you will.

I had started a position in Frontier on Monday, to which I added 150 shares. I also started a new position in Western Refining in this morning's sell off. Both stocks are near to support levels on their charts; WNR to its 50 day moving average, and FTO to its 200 day moving average.

While crack spreads have been narrowing (leading to a reduction in the stock prices), I will be building positions that will probably hold for a few months as we enter the fall. Again, these are not stocks to really buy and hold for 3 years, but with their volatility can be nice longer term trades if one has patience.

FTO now is up to 2.6% of the fund's holdings, and WNR 1.4%

Long FTO, WNR