Phillips 66 (PSX) Is Even More Attractive After Price Decline

PSX:  Looking Forward

According to Howard Weil report from May 11, U.S. Gulf Coast’s average crack spread in the current quarter has been $9.73 per barrel, compared to $9.28 in the fourth quarter of 2015.

While Phillips 66 (NYSE:PSX) is geographically diverse and totaling 2.2 million barrels per day of throughput capacity, the U.S. Gulf Coast represents the largest portion at 738,000 barrels per day. Approximately 81% of total throughput capacity is located in the U.S., with international locations that include Ireland, the United Kingdom, Germany, and Malaysia. As such, we can expect a slightly better refining margin in the current quarter compared to the prior quarter.

Source: howardweil.com

Warren Buffett & PSX

According to Bloomberg, Buffett’s through Berkshire Hathaway (BRK-A) has been steadily adding to his holdings since August 2015, when he first reported a $4.5 billion stake in the company.

Buffett’s company now owns a 14 percent stake in the company, the sixth-largest holding in its portfolio. This year, he has spent about $1.08 billion on 14.1 million shares at an average price of $77.13, according to regulatory filings.

His total stake in the company is worth $5.94 billion based on May 16 closing price of $78.68. Many investors follow Mr. Buffett due to his impressive long time record of success in picking value stocks.

In my view, Mr. Buffett’s bet on Phillips 66 makes much sense.  Buffett has stated several times he looks to buy great businesses when their stock prices decline.

“Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
– Warren Buffett

In addition to Buffett, there were 34 other investors tracked by Insider Monkey that were long PSX on December 31, up from 33 total on September 30. Those 35 investors owned a hefty 15.40% of the company’s shares at the end of 2015. David Harding’s Winton Capital opened a stake consisting of 165,917 PSX shares in the first quarter.