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Stocks to Buy: Phillips 66 (PSX)

energy-stocks-to-buy-psx-stock It seemed like the story at refiner Phillips 66 (PSX) couldn’t get any better … until PSX went ahead and made a major deal with China’s Sinopec (SNP). Starting in 2016, PSX will now supply the chemical firm with around 34,000 barrels per day (bpd) of LPG — worth around $850 million at current prices for the fuel. PSX was already one of the best stocks to buy, but the SNP deal only makes it better.

China’s total LPG imports could reach half a million bpd by 2020 as the nation begins using the fuel as a feedstock for ethylene and chemicals production. Even with export costs, LPG is still cheaper than using traditional feedstock naphtha, which is derived from oil. And with many major Chinese chemical firms looking into building new LPG-fueled crackers, PSX could be the major driver when it comes to filling that need.

The deal is currently only a slight fraction of revenues for PSX stock. However, it could pave the way for similar deals with other Chinese manufacturers. CNOOC (CEO) is also considering using LPG for a new million ton-per-year ethylene cracker. Over time, PSX stock should see an incremental increase in its revenues tied to LPG exports.

That makes PSX stock — currently trading for a 30% discount to the S&P 500 when looking at P/E ratios — one of the best stocks to buy today.

Article printed from InvestorPlace Media,

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