Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.


$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.



Buffett’s Favorite Refiner Spared Squeeze

By Robert Rapier on September 6, 2016

The largest U.S. refiners that are not also oil producers are Phillips 66 (NYSE: PSX), Valero Energy (NYSE: VLO), Marathon Petroleum (NYSE: MPC) and Tesoro (NYSE: TSO). But one of these stocks is not like the others. While the latter three have been down double-digits in 2016 since very early in the year, Phillips 66 has fared significantly better:


We have covered in detail the reasons for the refining sector’s troubles this year. The primary culprit is the rise in oil prices, which eroded refining margins. When oil prices are falling, fuel prices tend to fall more slowly, inflating margins. This is why refiners handily outperformed oil producers in 2015. But the opposite happens when oil prices are rising, so refiners have underperformed in 2016.

Why has Phillips 66 fared so much better than its peers? Let’s start by looking at some of the important financial metrics for each of the four largest pure-play U.S. refiners:  


  • EV – Enterprise value in billions of U.S. dollars as of Sept. 2
  • EBITDA – Earnings before interest, tax, depreciation and amortization, in billions for the trailing 12 months (TTM)
  • FCF – Levered free cash flow in billions
  • Debt – Net debt at the end of the most recent fiscal quarter
  • Yld – Annualized yield based on the most recent quarterly dividend

 Phillips 66 is in fact cheaper than two of its three comparables on the basis of EV/EBITDA, even after the large year-to-date declines suffered by those refiners. On the other hand, it’s the only one of the four to have negative free cash flow over the past year (primarily a result of major capital expenditures).

But these metrics can’t explain the large discrepancy in performance. Perhaps another explanation is the “Warren Buffett effect.”

Buffett’s Berkshire Hathaway (NYSE: BRK.B) began purchasing shares of Phillips 66 in 2012. In 2013, it exchanged some $1.4 billion in PSX stock for the refiner’s pipeline polymers business but kept buying more shares. Berkshire Hathaway has steadily increased its PSX stake over the past year. During the second quarter of 2016, Berkshire purchased an additional 3.23 million shares, making PSX the 6th largest holding in its investment portfolio, with a market value of $6.3 billion. It now owns more than 15% of Phillips 66.

At Berkshire Hathaway’s annual shareholder meeting in April, Buffett was asked whether  Berkshire’s energy investments, including Phillips 66, stemmed from a long-term view on oil prices. Not at all, he responded: “We’re thinking about other things when we make those decisions.”

What might those thoughts be? Recall that in 2010, Berkshire Hathaway bought the Burlington Northern Santa Fe (BNSF) railroad. This was early in shale oil boom, and what ensued was explosive growth in rail shipments of crude oil produced in places like North Dakota to refineries around the U.S. One of BNSF’s most important customers is Phillips 66, which has refineries at multiple locations along BNSF lines. Incidentally, one of those happens to be the Phillips 66 refinery in Billings, Montana, where I worked a decade ago.

Could Berkshire Hathaway’s growing stake in Phillips 66 explain the company’s outperformance relative to its peers? Possibly. Berkshire has been accumulating PSX below $80 a share. The current price of PSX is $78.87, so barring a strategy shift or additional appreciation the buying is likely to continue.

What’s the end game for Berkshire Hathaway? Some speculate that the company may be positioning for a buyout of PSX, using the playbook from its acquisition of BNSF in 2010. By the time that deal was announced, Berkshire had accumulated a 23% stake in the company. The acquisition provided a premium of about a 30% to the market price.  

I have personally owned Phillips 66 shares from the time I worked for the refiner’s former parent, ConocoPhillips (NYSE: COP). But is PSX worth adding to your portfolio given Buffett’s interest? Consider subscribing to The Energy Strategist as we continue to monitor this developing situation.  

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)


You might also enjoy…


12 Stocks Virtually Guaranteed to Go Up in 2018

You may not believe it, but I have a calendar in my hands right now that tells me the exact date and time when a few stock are practically guaranteed to go up. 

Twelve of them, in fact.

And if you were to invest in them following the simple buy and sell instructions found in this calendar…

You could be making $1,181… $11,814…. and as much as $190,916 more than by using a “buy-and-hold” strategy.

And here’s the best part…

I’m giving away a few copies of this calendar to interested investors (First come, first served).

With this calendar, you could get higher profits with less risk.

Click here to get the full story, and to claim your copy.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.