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Why Sunoco LP (SUN) Surged Higher Today

Sunoco LP (NYSE:SUN) shares have popped around 9% in the pre-market the company announced that it has entered into a definitive agreement to divest the majority of its convenience stores to 7-Eleven for $3.3 billion in cash. In terms of specific assets being sold, Sunoco has agreed to sell around 1,100 convenience stores in 19 separate geographic regions and has also entered into a 15-year take-or-pay fuel supply agreement with a 7-Eleven subsidiary under which Sunoco will supply approximately 2.2 billion gallons of fuel annually. Sunoco will sell around 200 convenience stores presumably to another buyer in a separate process.

Sunoco LP (NYSE:SUN) is selling the assets to focus more on its fuel supply business and to further enhance the company’s leverage and credit profile (Sunoco will use the proceeds to pay indebtedness and for general partnership purposes). CEO Bob Owens said, ‘The sale of these retail assets to 7-Eleven is the beginning of an exciting evolution for SUN into a premier nationwide fuel supplier. Our supply agreement with 7-Eleven provides SUN with a predictable long-term income stream, and this transaction quickly allows SUN to improve its financial profile’.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Overall, the smart money sentiment around Sunoco has been rather staid. Of the 742 elite funds we track, 10 funds owned $29.34 million of Sunoco LP (NYSE:SUN) and accounted for 1.00% of the float on December 31, versus 12 funds and $47.55 million respectively on September 30. In terms of specific fund activity, T Boone Pickens‘ Bp Capital inched up its holdings by 2% to 416,496 shares at the end of December, good for 3.51% of the fund’s 13F portfolio. Leighton Welch‘s Welch Capital Partners also initiated a new stake of 182,603 shares during the same time period.

The Bottom Line

Sunoco LP (NYSE:SUN) shares have popped after the company announced the divestiture of the majority of its convenience stores to 7-Eleven for $3.3 billion. For more reading, check out ‘11 Countries That Consume The Most Oil In the World‘.


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