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Smart Money Already Liked This Hot Refiner, And Now It’s Growing

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PBF Energy Inc (NYSE:PBF) is in the news today after agreeing to purchase a California refinery from Exxon Mobil Corporation (NYSE:XOM) for $537.5 million. PBF’s purchase will help the company diversify across different fuel regions and will give the company market share in the lucrative California market. The purchase will increase PBF’s refinery output from 745,000-per-day to 900,000-per-day. The Torrance, California refinery had previously experienced a fire in February but will return to full production status before the deal closes. Shares of PBF Energy are up by about 6% in light pre-market trading. Let’s take a closer look at the refiner and see how the world’s greatest investors view it.


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While shares of upstream and integrated companies have fallen substantially, shares of refiners have rallied. Valero Energy Corporation (NYSE:VLO) is up by 24% year-to-date, while PBF is up by 10% year-to-date. Unlike upstream producers, refiners benefit from low crude prices because soft energy prices lower refinery costs. Refiner revenues have not fallen nearly as much as their inputs as domestic economic activity remains strong. The lower costs and relatively stable revenue means big profits for refiners.

While many in the market don’t think that the big profits are sustainable, one famous investor is bullish. Warren Buffett of Berkshire Hathaway recently upped his stake in Phillips 66 (NYSE:PSXto 61.5 million shares from 58 million shares. Buffett’s Phillips 66 purchase shows that he believes low oil prices will be around for an extended period of time. Buffett’s purchase is also notable because he sold his Exxon Mobil stake earlier in the year.

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