Buffett: Filling up on Phillips 66

02/09/2016 7:00 am EST

Focus: STOCKS

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

Our latest featured recommendation is a bet both on an eventually rebounding energy sector and one of Warren Buffett’s highest-profile investments, explains Nicholas Vardy, editor of Bull Market Alert.

Phillips 66 (PSX), a name you may recognize from the company’s branded gasoline stations, was spun-off from ConocoPhillips (COP) in 2012.

Here’s why I think Phillips 66 is set to rally after its recent sell-off.

First, Phillips 66 operates as an energy manufacturing and logistics company. As such, Phillips 66 has less exposure to the plummeting retail price of gas than other energy companies.

Still, typical of the baby out with the bathwater behavior of investors, the stock has been (unjustly) dragged down in the sell-off in the energy sector.

Today, the entire energy sector is weighed down by low crude oil and natural gas prices. But Buffett is clearly betting that the energy sector won’t be wiped off the map.

Second, Phillips 66 is one of Buffett’s biggest publicly-traded conviction bets in recent memory. Buffett increased his position in Phillips 66 substantially in 2015, buying around 22.1 million shares in the second quarter of 2015.

He boosted his holdings in PSX further in the third quarter of 2015 to 61.4 million shares with a market value of $4.7 billion. Buffett now owns a whopping 11.5% of the company.

And with the stock off almost 20% from its November highs, Buffett was busy buying Phillips 66 stock last week, sinking at least $177.3 million into the stock at prices between $74.33 and $80.08.

By buying Phillips 66, Buffett is following his time-honored advice to “be greedy when others are fearful and fearful when others are greedy.” I recommend you do the same. Buy Phillips 66.

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