Storm The Castle: HollyFrontier (HFC)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified HollyFrontier ( HFC) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified HollyFrontier as such a stock due to the following factors:

  • HFC has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $112.5 million.
  • HFC has traded 2.8 million shares today.
  • HFC is trading at 1.84 times the normal volume for the stock at this time of day.
  • HFC crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on HFC:

HollyFrontier Corporation operates as an independent petroleum refiner in the United States. The company operates in two segments, Refining and HEP. The stock currently has a dividend yield of 3.3%. HFC has a PE ratio of 27.5. Currently there is 1 analyst that rates HollyFrontier a buy, no analysts rate it a sell, and 11 rate it a hold.

The average volume for HollyFrontier has been 3.1 million shares per day over the past 30 days. HollyFrontier has a market cap of $7.6 billion and is part of the basic materials sector and energy industry. The stock has a beta of 1.55 and a short float of 3.8% with 2.60 days to cover. Shares are up 4.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates HollyFrontier as a hold. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins.

Highlights from the ratings report include:
  • HFC's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.31, which illustrates the ability to avoid short-term cash problems.
  • Despite the weak revenue results, HFC has outperformed against the industry average of 33.1%. Since the same quarter one year prior, revenues fell by 11.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • HOLLYFRONTIER CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, HOLLYFRONTIER CORP reported lower earnings of $1.40 versus $3.62 in the prior year. This year, the market expects an improvement in earnings ($3.54 versus $1.40).
  • The gross profit margin for HOLLYFRONTIER CORP is currently extremely low, coming in at 4.10%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.18% trails that of the industry average.
  • Net operating cash flow has significantly decreased to -$47.34 million or 170.64% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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