Monday, January 29, 2007

Paperstand (LCC, TSO, SUN, VLO, COP)

The WSJ reports that US Airways (LCC) is willing to increase its hostile takeover offer for Delta Air by $1bn under certain conditions as part of a last-ditch effort to win support from Delta creditors. The carrier said over the weekend that it would sweeten its $9.8bn cash-and-stock bid to about $10.8bn if the official committee of creditors approaches Delta with a demand that the Atlanta airline open itself to due diligence by US Airways. To get the additional $1bn, all in cash, the committee also would have to ask a bankruptcy judge to postpone a hearing next week on Delta's restructuring plan. The group also would have to agree to support the start of a formal antitrust review.

“Heard on the Street” out saying that with President Bush calling for significantly slowing the growth in gasoline consumption in the next decade, stocks of some refiners slipped temporarily last week, a sign that some investors are reassessing growth prospects for the refiners. That long-term concern may have overshadowed a near-term opportunity. There are good reasons to conclude refiners of crude are poised for a nice seasonal stock pop as the high-demand summer driving season approaches. Margins will "stabilize and start going back up in the spring," said John Parry, of John S. Herold. The energy-research co is bullish on refiners Tesoro (TSO) and Sunoco (SUN) and Valero (VLO). Although Herold doesn't rate those stocks, it has what Mr. Parry calls an "inferred buy" on them, b/c the stocks are trading below what Herold regards as their value based on their avg margins over the past 3 years. Herold has recommended investors buy ConocoPhillips (COP).

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