Phillips 66 (PSX)

Our PAST TOP PICK with PSX has triggered its stop at $92.  To remain disciplined, we recommend covering the position at this time.  This will result in a net investment loss of 9%, when combined with our previous entry recommendation.    

We reiterate this international midstream energy company as a TOP PICK.  Expectations for summer travel are bullish, which will support their 2 million bpd downstream operations.  It trades under 2x book and 8x earnings, with a ROE of 44%.  It pays a good dividend, backed by a payout ratio under 20% of cash flow.  We continue to recommend a stop at $92, looking to achieve $121 -- upside potential of 19%.  Yield 3.9%    

Trading at 5x earnings, 1.7x book and supporting a 40% ROE, we reiterate PSX as a TOP PICK.  The company has a bio-diesel fuel plant coming on soon in California, which used to process oil.  We like that cash reserves are growing and debt is being retired.  Its dividend is backed by a payout ratio under 20% of cash flow.  We recommend trailing up the stop (from $87) to $92, looking to achieve $126 -- upside potential of 18%.  Yield 3.6%   

PSX is the spin off of ConocoPhillips downstream refining and distribution assets.  It is generating outstanding cash flow, allowing cash reserves to grow as debt is retired and stock bought back.  It trades under 7x earnings, under 2x book value, and supports a ROE of 40%.  We recommend a stop-loss at $87, looking to achieve $125 - upside of 27%.  Yield 4.0%