HollyFrontier Corp (HFC), Northern Tier Energy LP (NTI), Phillips 66 (PSX): Three Refiners With 3 Different Reasons for Investment

Moreover, as I have mentioned above, HollyFrontier Corp (NYSE:HFC) is cheap. The company is trading on a historic P/E ratio of around 5.5 and a forward ratio of 9. Meanwhile, the company is sitting on $12.50 per share of cash, indicating that it is actually trading on a forward earnings multiple of around 6.8. Moreover, HollyFrontier has a strong balance sheet, with a debt-to-equity ratio of 0.2 and a current ratio of 2.7.

I have written further about HollyFrontier Corp (NYSE:HFC)’s value investment potential here.

Bigger is better

The reason for investment into Phillips 66 (NYSE:PSX) is simple; it is a good company at a great price. Indeed, investors have already been handsomely rewarded with the stock up around 80% since its split from parent ConocoPhillips in the middle of last year.

Phillips 66 (NYSE:PSX) is the largest refiner in the market and with operations around the world it is also the most diversified. Yet, despite the company’s global exposure and diversification, it is still trading at a discount to the majority of its peers in the oil and gas refining and marketing sectors. In particular, the 10-largest companies by market capitalization in the sector trade at an average historic P/E of 11.5, while Phillips 66 (NYSE:PSX) trades at a lowly P/E of 8.6.

In addition, the company trades at a PEG ratio of 0.8, indicating that the stock could offer growth at a reasonable price.

Furthermore, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) is a holder of Phillips 66 (NYSE:PSX) shares and there is a strong relationship between the refiner and Berkshire’s Burlington Northern Sante Fe unit, which could spur additional buying or even a takeover in the near future.

Conclusion

In conclusion, these three refiners all offer different plays on the same industry. Income investors can look to Northern Tier Energy LP (NYSE:NTI), value investors can look at HollyFrontier and investors who are adverse to risk can buy into Phillips 66 (NYSE:PSX). Personally, I would like to buy all three to gain the most diversification but if I could only buy one, HollyFrontier Corp (NYSE:HFC) would have to be my choice for the deep value on offer.

The article 3 Refiners With 3 Different Reasons for Investment originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves owns shares of HollyFrontier. and NORTHERN TIER ENERGY LLC. The Motley Fool has no position in any of the stocks mentioned. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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