Tracking a Buffett Energy Bet

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Global stock markets recorded their first positive week in 2016, with the Dow Jones up 0.66%, the S&P 500 gaining 1.41% and the NASDAQ jumping 2.29%. The MSCI Emerging Markets Index recovered a solid 3.08%.

This week’s Bull Market Alert recommendation is a bet both on an eventually rebounding energy sector and one of Warren Buffett’s highest-profile publicly traded investments.

Phillips 66 (PSX), a name you may recognize from the company’s branded gasoline stations, spun-off from ConocoPhillips 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 of $94, Buffet 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.”

Exclusive  Booking Triple-Digit Percentage Gains in Cybersecurity Options

I recommend you do the same.

Buy Phillips 66 (PSX) at market today, and place your stop at $65.00.

If you want to play the options, I recommend the March $80 calls (PSX160318C00080000), which last traded at $3.80 and expire on March 18.

Portfolio Update

Direxion Daily CSI 300 China A Share Bear ETF (CHAD) fell 3.94% for its first week in the Bull Market Alert portfolio. This short position capitalizes on the recent weakness in the Chinese domestic market and has soared since the beginning of 2016. Weakness in the Chinese economy is systemic, to a point, and will likely continue for quite some time — and CHAD is just the vehicle to deliver profits from this situation. CHAD is a BUY.

NEW FEATURE — Receive your alerts via text! You now can receive a text message on your cell phone to inform you whenever a trading alert is sent. To add this free new benefit to your service, please send an email to CustomerService@NicholasVardy.com with the following information and mention in the email that you want your cell phone added to your account:

  • Your Name
  • Your Zip Code
  • Your Email Address
  • Your Cell Phone number

Please note that we can only deliver text messages to cell phones with U.S. or Canadian numbers. Standard text messaging rates from your provider apply.

Nicholas Vardy

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE


img
previous article

Exchange-traded fund expert Doug Fabian talks about why the market has improved in the last few days and whether it will last.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike Turner’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street. Since 2010, Hilary's financial publications have provided stock analysis and investment advice to her subscribers:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE