While all the above are important to unlocking value at Valero, my Valero investment thesis is more an asset value play than simply a bet on improving refining margins and that hasn’t changed. Even if you agree with Jim Cramer and other bears out there that say that Valero management has no idea how to run a refiner, the assets the Company owns are worth something. According to the estimates I did in the post linked above, I believe them to be worth at a minimum $12/share and more reasonably $25/share if liquidated. Long term, as the industry rebounds and demand returns, these assets are probably worth significantly more. For a patient investor, this asset value as well as Valero’s continued support of a relatively generous dividend (>3%) should provide reassurance when the rest of the world seems to disagree.

The key to value investing is to invest with conviction when the rest of the market doesn’t seem to agree. Market oscillations and over reactions are a source of opportunity for continued purchasing and dollar cost averaging. Easier said than done. While I’m not selling my shares into the storm, I still find myself a bit shaken by the recent revelations at Valero. Only time will tell if Valero is truly a value or value trap. But, I’m willing to wait.

Disclosure: Long shares of VLO at the time of writing.