In our May 15, 2020 roundtable discussion “Q1 Earnings and Guidance: Here’s What’s Critical” we flagged US independent refiners as a well-positioned group at this stage of the cycle. In this issue, we’re adding Valero Energy (NYSE: VLO) to the Actively Managed Portfolio as a new buy recommendation.

Refiners are unlike almost any other group in the energy patch because they don’t benefit from rising oil and natural gas prices. In fact, all else constant, rising oil prices are actually bad news for the group.

Consider that refiners are manufacturing firms. Their most important raw material is crude oil, the feedstock for their plants, and their most important products are gasoline, diesel, jet fuel, kerosene and other refined products.