Thread: This Trade Could be Your Ticket to 27% a Year Income

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  1. #1

    Default This Trade Could be Your Ticket to 27% a Year Income

    Bad news tends to dominate the headlines and we often miss the signs of good news that are buried lower on the page. One example of good news was the unemployment rate for November falling to 7.7%, a four-year low.

    As people return to work, the economy should grow, and that growth will benefit a number of companies. Energy companies are usually among the winners in a growing economy. These companies can be risky, though, especially if the price of oil falls, but there are some companies that are diversified energy plays.
  2. #2


    Phillips 66 (NYSE: PSX) is a diversified energy company. With 15 refineries, Phillips 66 offers a way to benefit if the demand for oil and gasoline rises, as it would if the economy grows. The company's 10,000 gas stations and retail outlets would benefit from an increase in the number of miles driven. And demand and prices of its chemicals will increase with gains in industrial production. With so many ways to benefit from growth, Phillips 66 is in some ways a trade on GDP.
  3. #3


    Phillips 66 was spun off from ConocoPhillips (NYSE: COP) earlier this year and has a limited trading history. The stock does seem to be undervalued, trading at a price-to-earnings (P/E) ratio of about 6, less than half the average of large-cap stocks in the stock market. Earnings are expected to drop next year, but Phillips 66 still looks undervalued with a P/E ratio of 9 based on next year's expected earnings. After falling next year, analysts expect earnings per share (EPS) to grow at about 7.2% a year, a number I think we can use to define a fair value for Phillips 66.

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