Phillips 66 (NYSE: PSX) has risen handily since Warren Buffett disclosed that he has a stake in the oil company in the middle of July. Now shares have hit a new post-IPO high after earnings, although shares have backed handily off from those highs. It seems that investors added too much Buffett-hype this morning as the media outlets were pumping that Buffett owns a new stake in the company.
It was in mid-July that Warren Buffett said Berkshire Hathaway Inc. (NYSE: BRK-A) has invested additional capital via one of his new investment managers (Ted Weschler or Todd Coombs). When Buffett made this announcement on Bloomberg TV, the share price of Phillips 66 was $34.75 on a dividend adjusted price basis, but shares had dipped down into the high $20s just a month before. Shares were at $37.60 as of Tuesday’s close, but they went above $40 briefly this morning after the oil refiner and retailer’s earnings. The prior post-IPO high had been $38.36.
What is so interesting is that this should not be a surprise at all that Buffett a) has a stake and b) that he added to the position. After the ConocoPhillips (NYSE: COP) spinoff of Phillips 66, the oil sector did not exactly perform the best. Berkshire Hathaway automatically received Phillips 66 shares in that spinoff. A review of the full Buffett holdings shows a stake of roughly 29.1 million shares of ConocoPhillips. That stake used to be much larger, but Buffett got his timing wrong during the oil craze of 2007 to 2008 and he had some serious losses for a while.
The earnings growth is adding a boost to Phillips 66. Chasing higher earnings and unlocked value is one thing. Chasing the Buffett stake here this morning just because the media keeps pointing out that Buffett has a stake should merely be an afterthought at this point.
JON C. OGG