Trump's Win Fuels a Massive Rally in Refining Stocks
Image source: Getty Images.
What happened
Refining companies, especially U.S. independents, soared on Wednesday after Donald Trump won the White House. Leading the charge wereCVR Refining (NYSE: CVRR), CVR Energy (NYSE: CVI), PBF Energy (NYSE: PBF), Alon USA Energy (NYSE: ALJ), and HollyFrontier (NYSE: HFC):
CVRR Price data by YCharts
So what
Fueling today's rally is speculation that Trump will ease costly renewable fuel regulations that are hurting independent refiners. Driving that belief is a fact sheet published by the Trump campaign earlier this year in which he called for the elimination of the system of buying and selling biofuel blending credits, which are also known as renewable identification numbers, or RINs. The current system requires refiners to buy credits to meet biofuel blending requirements and has been particularly costly to independent refiners, which are those that don't own a retail arm.
CVR Refining CEO Jack Lipinski is one of several refining executives to criticize the system publicly. In CVR Refining's third-quarter earnings release, he said:
Several other refiners recently noted the negative impact the current system is having on their financial results. PBF Energy, for example, noted this past quarter that the company's results "experienced the added headwind of a 15% increase in the cost of compliance with the renewable fuels mandate." Meanwhile, HollyFrontier said that one of the issues impacting it during the third quarter was "escalating costs associated with the RFS mandate." Suffice it to say, the elimination of the current system would remove a significant headwind.
Now what
Adding fuel to today's rally is that Carl Icahn-- a Trump supporter -- is a major investor in CVR. Given his support, as well as the fact that independents call the RIN system "rigged,"suggests that this could be a top agenda item for Trump and his America first energy policy.
10 stocks we like better than CVR Refining When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and CVR Refining wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 7, 2016
Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.