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Why Hold Strategy is Apt for Phillips 66 (PSX) Stock Now
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Phillips 66 (PSX - Free Report) has gained 24.2% in the past year, outpacing the industry’s 3.4% improvement.
What's Favoring the Stock?
PSX has a diversified business model, with a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of its operations, Phillips 66 has a solid footprint pertaining to safety, profitability, size and competitive strengths.
It is focusing more on businesses like midstream, renewables and chemicals, which makes the business model more stable. Having 72,000 miles of U.S. pipeline network, the company expects roughly 80% of its midstream contracts to be fee-based, signifying a stable business model with low sensitivity to commodity price fluctuations.
Phillips 66, carrying a Zacks Rank #3 (Hold), has a strong focus on returning capital to shareholders. In July 2012, the company got authorization for $25 billion of share buyback, and since then, the energy major has repurchased shares worth $16.9 billion.
Risks
Phillips 66’s refining business is exposed to extreme volatility in commodity prices since the end products are made with raw crude oil. Rising input costs hurt the company’s refining business.
Sunoco LP, a leading independent fuel distributor in the United States, has a stable business model and has relatively lower exposure to commodity price volatility. This is because the partnership distributes fuel to branded distributors under long-term contracts.
Enbridge generates stable fee-based revenues from its natural gas transmission network. Thus, the midstream energy player connects key markets with the prolific supply basins.
Western Midstream Partners has a stable business model, banking on its midstream assets. With new productions coming online and activities in the Delaware Basin intensifying, there is a notable uptick in total throughput for natural gas, crude oil and natural gas liquids.
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Why Hold Strategy is Apt for Phillips 66 (PSX) Stock Now
Phillips 66 (PSX - Free Report) has gained 24.2% in the past year, outpacing the industry’s 3.4% improvement.
What's Favoring the Stock?
PSX has a diversified business model, with a significant presence in businesses related to refining midstream, chemicals and marketing & specialties. In each of its operations, Phillips 66 has a solid footprint pertaining to safety, profitability, size and competitive strengths.
It is focusing more on businesses like midstream, renewables and chemicals, which makes the business model more stable. Having 72,000 miles of U.S. pipeline network, the company expects roughly 80% of its midstream contracts to be fee-based, signifying a stable business model with low sensitivity to commodity price fluctuations.
Phillips 66, carrying a Zacks Rank #3 (Hold), has a strong focus on returning capital to shareholders. In July 2012, the company got authorization for $25 billion of share buyback, and since then, the energy major has repurchased shares worth $16.9 billion.
Risks
Phillips 66’s refining business is exposed to extreme volatility in commodity prices since the end products are made with raw crude oil. Rising input costs hurt the company’s refining business.
Stocks to Consider
Some better-ranked stocks are Sunoco LP (SUN - Free Report) , Enbridge Inc. (ENB - Free Report) and Western Midstream Partners, LP (WES - Free Report) . While Sunoco LP and Enbridge sport a Zacks Rank #1 (Strong Buy), Western Midstream Partners carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco LP, a leading independent fuel distributor in the United States, has a stable business model and has relatively lower exposure to commodity price volatility. This is because the partnership distributes fuel to branded distributors under long-term contracts.
Enbridge generates stable fee-based revenues from its natural gas transmission network. Thus, the midstream energy player connects key markets with the prolific supply basins.
Western Midstream Partners has a stable business model, banking on its midstream assets. With new productions coming online and activities in the Delaware Basin intensifying, there is a notable uptick in total throughput for natural gas, crude oil and natural gas liquids.