Christopher C. Grisanti is a magna cum laude graduate of Harvard Law School who gave up his partnership track law career at Simpson Thacher & Bartlett to become a professional stock picker. He’s now the Owner and Co-Founder of Grisanti Capital Management. In an interview on February 15, 2013, Grisanti cites HollyFrontier Corp (HFC) as a top pick:
“Many of the Wall Street analysts that have analyzed these refiners for 30 years don’t want to say things are different. They have a picture of refineries as very cyclical companies, but I think they don’t appreciate that there is a secular up trend that will continue, we think, for three or four more years that will help these guys earn record profits not for six or nine months but for literally half a decade. That’s why our biggest position is HollyFrontier (HFC), which is a terrific refiner. Valero (VLO) is our second biggest position. HollyFrontier paid five special dividends last year, they are generating so much cash,” Grisanti said.
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HFC announced on May 16 that it would pay yet another special dividend along with its regular quarterly shareholder payout; a special cash dividend in the amount of $0.50 per share, payable on June 10, 2013 to holders of record of common stock on May 29, 2013. The company will also be paying a regular quarterly dividend of $0.30 per share. This dividend will be paid on July 3, 2013 to holders of record of common stock on June 12, 2013.
Mr. Grisanti goes on to say that the next step for investors is the pipeline portion of this sector:
“The second way to play the oil renaissance, besides refineries, are pipelines. Pipelines are going to be a growth industry for at least another five years. Holly is a great refinery because it is near the oil. If that oil can be moved, especially if it can be moved to either coast, it’s even more valuable. If we can get the oil to the East and West Coast, that will be a tremendous boon to the refineries there because right now they have to import their oil from overseas. They are paying more for their oil so they would love to get their hands on the cheap oil.“
Perhaps this is why HollyFrontier’s partial subsidiary Holly Energy Partners, L.P. (HEP) is attracting institutional investors and insider purchases. Holly Energy Partners is a publicly traded limited partnership operating a system of petroleum product and crude oil pipelines, storage tanks, distribution terminals and loading rack facilities in West Texas, New Mexico, Utah, Arizona, Washington, Oklahoma, Kansas, Nevada, Wyoming and Idaho. HollyFrontier currently owns a 39% interest in HEP, including the 2% general partner interest.
Bruce Shaw, the President of Holly Energy Partners, bought another 7,000 units of his company on May 10, as reported to the SEC on May 14, for $37.34 per unit. This brings his total holdings to 32,972 units.
Institutional support for HEP is also being shown by the dean of MLP investing, Jerry Swank, who made an initial purchase of 5675 units for his investment fund Cushing MLP Asset Management, LP. Jerry Swank is the Founder and Managing Partner of Swank Capital, and he has 35 years of experience in investment management and investment analysis.
The combination of institutional support and insider buying into HEP indicates a positive story developing for this high-yield security.