Continuing with the spinoff theme, Cramer went on to examine CST Brands (CST), the 2013 retail spinoff from Valero (VLO). CST operates gas stations and convenience stores, many of which it owns. Cramer noted that low oil prices have been a mixed blessing for the company. Although people may be pumping more gas due to low prices, the company’s strong presence in oil country (Texas) means it has suffered a bit. Cramer feels that the stock hasn’t done that much, despite numerous positives from management including plans to monetize its real estate AND pursuing strategic options to enhance shareholder value. It’s always good to see management trying to generate shareholder value.
Despite being ‘not cheap’, Cramer still think it’s worth speculating on:
“My view? With CST Brands trading at just 17 times next year’s earnings estimates, the stock is not exactly what you would call cheap, but I am willing to give it my blessing for speculation,” Cramer said.
Both the monetization of real estate and the strategic review could be positive catalysts for CST, and Cramer doesn’t think it pays to wait around for the stock to turn around. At that point it will be obvious to everyone, and you will be too late.
‘Blessing for speculation’ doesn’t really sound like a ringing endorsement though, especially for something trading at ‘just 17 times’ earnings. Sort of like, why not throw the dice and see what happens?
Looking at peers such as Murphy USA (MUSA), CST seems to be in line with the industry. Other players in the industry, such as Susser Holdings and Hess’ retail business, have been acquired at rich valuations, so there is potentially some room. While it certainly hasn’t been a home run, CST also hasn’t been an awful investment for shareholders of the spin. Has Cramer convinced you to take a flier on CST?
Disclosure: Author holds no position in any stock mentioned.
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