Refiners are not my typical cup of tea (much more cyclical than secular growth) but a few times a year they are generally good for a nice solid run. But we haven't seen one in a long while - even an upturn in crack spreads has done nothing for these stocks.... very very strange.
The technicals in this stock give a very easy roadmap so by selling the position and waiting for a breakout I can conserve cash or apply it elsewhere, long or short. Simply put we want to see Frontier Oil break back above its 50 day moving average, currently $43 (and falling), and then we have the potential for this good move. The stock has been 'basing' in a narrow range for 3 weeks so this could happen at any moment (or not happen at all). But with crack spreads rising, you'd think the stock would reflect this sooner rather than later.
So this might be a temporary exit, as we await the stock chart to firm up. I had lowered my exposure to Frontier Oil to 1.2% of the fund and am selling all 350 shares @ $41.75. I'd gladly pay $43+ when the appropriate time comes. Much like the deep sea oil drillers, I have been in and out of these stocks during the life of the fund, getting nowhere fast - but of course the deep sea oil drillers finally took off once I had sold out my exposure. :) Hopefully the same will not happen here - I will keep a close eye out. If crude falls in 2008, profit margins should expand meaningfully in this space and perhaps we get "the run" then....
No position
