After a brutal stretch that absolutely battered the refining industry, and a growing sense that any degree of sector normalcy may have to be put off until next year, the analysts at Jefferies that cover the refining and midstream stocks took a bold step this week and upgraded some of the top companies in their coverage universe.

While acknowledging the obvious challenges that have been presented for product demand, the analysts look beyond the near-term issues and focus on what could be some powerful data points for later this year and in 2021. They said this in the report:

We are upgrading covered US independent oil refiners and their sponsored MLPs after these stocks were pummeled by a barrage of negative news and near-term headwinds; most refining names are down >50% year-to-date. While we anticipate proliferating ‘social distancing’ responses to COVID-19’s spread will have a severe impact on 2020 refined product demand, resulting in acute financial pressure in the second and third quarter, we see the virus’s passing, low interest rates, fiscal stimulus, low energy prices, and globally destocked supply chains fueling a return to more normal conditions in 2021. Moreover, the refining group is well situated to weather this storm with strong balance sheets, robust liquidity, and long-dated maturity schedules; on our conservative 2021 estimates (-21% vs. consensus, on average), many names are trading at multi-turn discounts to historical averages.

Here, we focused on the independent U.S. refiners Jefferies has moved to Buy from Hold and also included the firm’s top pick.

HollyFrontier

The analysts feel comfortable about this smaller cap company. HollyFrontier Corp. (NYSE: HFC) is an independent refiner that produces various refined products. The company’s operations are organized into two reportable segments: Refining and Holly Energy Partners.

The company owns and operates five refineries in Artesia, New Mexico; Woods Cross, Utah; Tulsa, Oklahoma; Cheyenne, Wyoming; and El Dorado, Kansas. In addition, HollyFrontier owns and operates Holly Asphalt, which manufactures and markets asphalt products, and owns a 32% limited partner interest and 2% general partner interest in Holly Energy Partners.

Shareholders receive a 5.85% dividend. The Jefferies price objective for the shares is $41, and the Wall Street consensus target is $46.29. HollyFrontier stock closed up over 11% on Thursday, at $23.95 a share.

Marathon Petroleum

This solid way to play the energy sector remains the top pick at Jefferies. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States. It operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.