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Energy Analyst: Valero a Good Deal

Friday, 2 Dec 2011 | 3:28 PM ET

Among the gainers in the energy sector Friday, Valero also stood out as a solid play looking ahead, said energy analyst Fadel Gheit.

The Oppenheimer pro said he was bullish on the world’s largest refinery company, despite a recent selloff he called “a knee-jerk reaction.” Strong fundamentals and management, as well as a low valuation, also made it a good bet, he said

Buy Valero?
A look at why Fadel Gheit, Oppenheimer & Co. senior energy analyst, thinks this is the best stock to weather a market meltdown or economic storm.

“I don’t think this stock deserves this huge selloff that happened over the last few weeks,” Gheit said.

Valero Energy's balance sheet showed $2 billion in cash, traded at a 30 percent discount off its highs and has one of the highest dividend yields at 2.72 percent.

VLO traded around $23 midday.

One metric to watch: The gap between WTF and brent crude futures.

“We still have $8-9 differential between WTI and brent crude, which although much lower than it was only a couple of months ago, is almost four times higher than it was last year,” he said.

Gheit said the outlook was good for the sector and Valero.

“Economic growth will increase demand for oil,” he said. “There’s no question about that.”


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Trader disclosure: On Dec. 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Najarian is long AAPL; Najarian is long C; Najarian is long JPM calls; Najarian is long WFC calls; Najarian is long INTC; Najarian is long YHOO; Najarian is long PFE; Najarian is long TEVA; Brown is long VOD; Brown is long SBUX; Kinahan is long Cq long GS through options; Grasso owns AKS; Grasso owns AMR; Grasso owns ASTM; Grasso owns AVAV; Grasso owns BA; Grasso owns BAC; Grasso owns D; Grasso owns LIT; Grasso owns MHY; Grasso owns PFE; Grasso owns PRST; Grasso owns S; Grasso owns XLU;

Steve Grasso

Stuart Frankel & Co. and its partners own CSCO

Stuart Frankel & Co. and its partners own CUBA

Stuart Frankel & Co. and its partners own GERN

Stuart Frankel & Co. and its partners own GM

Stuart Frankel & Co. and its partners own HPQ

Stuart Frankel & Co. and its partners own HSP

Stuart Frankel & Co. and its partners own HSPO

Stuart Frankel & Co. and its partners own JPM

Stuart Frankel & Co. and its partners own MET

Stuart Frankel & Co. and its partners own MSFT

Stuart Frankel & Co. and its partners own MU

Stuart Frankel & Co. and its partners own NYX

Stuart Frankel & Co. and its partners own PRST

Stuart Frankel & Co. and its partners own RDC

Stuart Frankel & Co. and its partners own UAL

Stuart Frankel & Co. and its partners own WFT

Stuart Frankel & Co. and its partners own XRX

Colin Gillis

RESEARCH IN MOTION (RIMM): Investment banking (next 3 months): BGC Financial LP and/or its affiliates, expect to receive, or intend to seek, compensation for investment banking services within the next three months from all of the companies referenced within this report.

Vic Alboini

Alboini and a group of shareholders own 10% of RIMM shares

Rich Ilczysyn

Ilczyszyn is long gold

Ilczyszyn is long Oil

Ilczyszyn is long Euro

Fadel Gheit

VALERO (VLO): Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3 months from VLO.

George Davis

RBC is a market maker in European currencies

Catherine Arnold

PFIZER (PFE): I, Catherine J. Arnold, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.

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