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Oh how I love Phillips 66



December 14, 2012 – Comments (2) | RELATED TICKERS: PSX

Oh how I love Phillips 66.  Man, these guys have been making all of the right moves lately and fortunately I have been along for the ride.  I established my initial position in PSX after it was spunoff from COP earlier this year.  This one was a textbook spinoff, experiencing a dip as many shareholders dumped the shares that they received.  As someone who has not historically been a big fan of refining, I didn't even want the shares at first...until I researched them and realized how undervalued they were.  I went from wanting to dump my shares to wanting to add more.

Here's my brief pitch on the company from back in May:

I'm certainly no fan of refining and I applauded COP's move to spin-off its refining assets into Phillips 66 when it was first announced.Having said that, after PSX's recent drop in price combined with the fact that as the excellent Barron's article states 40% of its earnings come from chemical and midstream businesses not refining I like the stock at this level.

PSX is up 85% since then in my portfolio and in CAPS.  Now the company just announced that it plans to spinoff some of its pipeline assets in an MLP next year.  I haven't looked into the move in great detail yet, but I suspect that the move will unlock even more value as PSX retains the majority of the MLP shares itself and the ones that do trade after the IPO will likely be afforded an even higher multiple than PSX is currently being given.  Yield instruments like MLPs are receiving absurd valuations these days.

Thanks for reading everyone.  Happy Holidays and have a great weekend!

Phillips 66 to form MLP next year, ups capital program


2 Comments – Post Your Own

#1) On February 07, 2013 at 9:50 PM, ikkyu2 (98.15) wrote:

The stock has done nothing but go up.  Do you have a feel for what 'fair value' would be, or at least what would make it parity with VLO, TSO, and similar?

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#2) On August 05, 2013 at 4:54 PM, jaybird43 (23.02) wrote:

You gotta love these spinoffs. Made a double and got out of MPC and now wish I had held on. I am holding onto Psx and will add to VLO on dips. I look at spinoffs in a different light but don't know about the latest one from VLO to spin off the CST. Holding that for now too.

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