For investors who want to invest in the oil and gas space without worrying about the extreme volatility that has been a hallmark of the space in the past few quarters, gas station stocks represent a suitable alternative. That’s because unlike companies which are into exploration and drilling, companies which operate gas stations are relatively immune to the fluctuations in crude oil prices, since their margins remain nearly the same regardless of the price of a gallon of petrol. Most gas stations also run a convenience store along with their core operations, which acts as an additional revenue stream. Moreover, unlike other commodities which witness a decline in consumption when their prices increase, gasoline has an almost inelastic demand. Hence, whatever the price per gallon of gasoline may be, the number of gallons a gas station sells doesn’t fluctuate much. Taking into account all of these advantages, we have compiled a list of gas station stocks based on their popularity among the hedge funds in our database going into 2016. In this article, we will go through the five gas station stocks that topped the rankings and which could have the potential to outperform their peers going forward.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 Murphy USA Inc (NYSE:MUSA)
– Investors with Long Positions (as of December 31): 19
– Aggregate Value of Investors’ Holdings (as of December 31): $190.55 million
Though shares of Murphy USA Inc (NYSE:MUSA) appreciated by over 10% during the December quarter, the number of funds tracked by us long the stock inched down by three while the aggregate value of their holdings in it came down by $18.2 million during the period. Billionaire Mario Gabelli‘s GAMCO investors was one of only a few funds which increased its stake in the company during the fourth quarter, increasing its holding by 4% to 487,700 shares. Murphy USA Inc (NYSE:MUSA) operates the vast majority of its gas stations at Wal-Mart locations. However, the seemingly dire decision by Wal-Mart Stores, Inc. (NYSE:WMT) earlier this year to operate its own gas stations has had no impact on Murphy USA Inc (NYSE:MUSA)’s stock, as it currently trades up by 2.18% year-to-date. For the fourth quarter, Murphy USA reported EPS of $0.69 on revenue of $2.93 billion, far below analysts’ expectations of EPS of $1.05 on revenue of $3.24 billion.
#4 CST Brands Inc (NYSE:CST)
– Investors with Long Positions (as of December 31): 23
– Aggregate Value of Investors’ Holdings (as of December 31): $697.08 million
Investors in our database with long positions in CST Brands Inc (NYSE:CST) declined by two during the fourth quarter, but the aggregate value of their holdings in the company increased by $57.8 million. Shares of CST Brands Inc (NYSE:CST) were trading with significant year-to-date losses a few weeks ago, but have since recovered thanks t the company announcing on March 3 that it is exploring strategic alternatives to further enhance shareholder value. Along with the announcement, the company also revealed that it has reached an agreement with activists JCP Management and Arnaud Ajdler‘s Engine Capital to appoint their respective nominees, Tad Dickson and Rocky Dewbre, to its Board of Directors. Engine Capital initiated a stake in CST Brands during the fourth quarter, purchasing 506,445 shares of the company.
The top three gas stations stocks to buy now are revealed on page two.