We Just Tripled The Market — Don’t Miss My Next Pick
Readers of my premium advisory, Top Stock Advisor, woke up to some good news on Monday morning.
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Early that day, Marathon Petroleum (NYSE: MPC) announced it would buy oil refiner Andeavor (NYSE: ANDV) in a $23 billion deal, or roughly $152 per share, a premium of about 24% over Friday’s closing price. Shares immediately rocketed 16% on the news.
For my readers, the deal is even sweeter.
#-ad_banner-#As soon as I heard this news, I sent out an alert to sell ANDV as soon as possible. Those who heeded my advice are walking away with an 83% gain in a year and half. For comparison, that’s more than three times the S&P 500’s 27% return over the same period.
Now, there was no way to predict this sale — it’s just a stroke of good luck. But it does help that Andeavor was an incredible company to begin with, and a perfect fit for my Top Stock Advisor portfolio.
A Timelessly Great Company
When I first recommended Tesoro (the company that would become Andeavor in an August 2017 name change) to my readers in November 2016, the stock had already returned 234% to investors in the previous five years. The San Antonio, Texas-based company had built a robust network of retail gas stations, refineries, pipelines, marine terminals and storage facilities. Even better, the stock had suffered a 40% drop on low gas prices, making it an incredible deal.
But what really drew to ANDV, and what made it a perfect fit for my portfolio, were the company’s other numbers. The company boasted the best profit margins in its industry. In fact, its profit margin dwarfed the industry average by more than 6-to-1 and its return on equity was quadruple that of its peers.
The company had spent the last several years improving margins, cutting costs, and developing its network. In 2008 and 2012, Tesoro generated around the same amount of revenue as it did in 2015, but the major difference is how much of that money it kept. Despite similar sales, Tesoro’s earnings per share in 2015 were double those of 2012.
And despite a drop in revenue from $40.6 billion in 2014 to $28.7 billion in 2015, the company more than doubled EPS and increased operating cash flow by 50%.
This focus on efficiency and cost cuts has allowed Tesoro to handily beat its peers in nearly every financial metric. The company improved gross margins from 12% in 2014 to nearly 22% last year, and profit margin has jumped from 2.1% in 2014 to 6.6% today.
All of this means that in a period of low gasoline prices — meaning smaller revenues for oil companies — Tesoro was still excelling.
So at an undervalued P/E of 7.7, and boasting a 2.5% yield (with a three-year growth rate around 37%), Tesoro was an easy add to my portfolio.
The Top Stock Advantage
Again, this week’s buyout news was a stroke of good luck for us. But Andeavor had already been outperforming the market before that. And the reason is simple.
Companies like Andeavor will always outperform, and not for some complex reason but for simple ones that are as true in today’s market as they were 100 years ago. They all share the characteristics we look for in Top Stock Advisor picks.
We look for:
1. Companies that enjoy huge, long-term, advantages over their competition (like Andeavor’s superior profit margins).
2. Companies that produce goods and services necessary for everyday life (like gasoline).
3. Companies that pay investors by growing dividends or buying back massive amounts of their own stock (like Andeavor/Tesoro’s steadily growing dividend).
Stocks with these qualities made the great fortunes in investing, like Buffett and Rockefeller. And it’s these stocks that will continue to build fortunes in the years to come.
Finding The Next ANDV
Your shot at Andeavor is likely over, but don’t worry — there’s a lot more where that came from.
Right now, I’m offering another installment of my successful series of annual reports, the Top 10 Stocks for 2018.
This includes stock No. 3, a company that’s returned 813% since 2008 — and is still going at 23% a year. Equally impressive is stock No. 5, which has grown same-store sales every year for 27 years, through every retail environment.
These stocks are your best bet for building wealth in 2018 and beyond. What’s more, I’m offering this report for free. There’s absolutely no risk to you. All we ask is that you try a 90-day, no obligation trial membership the Top Stock Advisor newsletter just to see if you like it. Even if you don’t, you can keep the report as a free gift.
Follow this link to learn more.