Refining Stocks Drop Out

Ever since I started MFI back in February of 2006, Refining stocks have been a mainstay on the lists. But to stay on the list, you have to keep a strong earning stream and as I have pointed out, most refiners barely made a profit and some actually posted losses in the quarter ending March 31st. HOC is a great example, their operating income for the quarter ending 3/31/07 was $96.5m. This year, it dropped all the way down to 9.5m. That takes the EY/ROC from 21%/50% to 17%/41%. They will likely drop further as the 2nd quarter of 2007 was an all-time best for refiners. That also explains why the stock prices of refiners have dropped, even though they were on the MFI lists in numbers 6 months ago. MFI was "predicting" that they would replicate their record 2007 year. In retrospect, they will fall well short. It goes without saying that comapnies that make less money in the upcoming year will generally not see their stock prices thrive.

Rambling Comments:

• HURC actually dropped below $36. It was not time for a MFI buy for me, but I bought some HURC outside of MFI.
• QCOR is a stock I think will get added to new Russell 3000 index in June, I bought some outside MFI as well.
• I am going back to the basics on my MFI investments. I will be making purchases in tranches of 5 at regular intervals and will be focusing on stocks greater than $1b market cap. I started on May 22nd with TRA, AEO, MHP, RHI and ACN. I figure it'll take me a year to transition to that approach. I don't know that I'll always go greater than $1b, but until I see M&A activity picking up in the small caps, I think I'll keep my holdings minimized.
• I have done very well the past 3-4 weeks, but still have a long road to travel to get to breakeven, let alone get to the benchmarks.