We recently published a list of Jim Cramer is Watching These 8 Stocks. In this article, we are going to take a look at where Phillips 66 (NYSE:PSX) stands against other stocks that Jim Cramer is watching.
Jim Cramer, the host of Mad Money, recently highlighted a surge in merger activity, pointing out that we’ve seen a significant uptick in deals over the past few days. He explained that this wave of mergers and acquisitions aligns with what he’s been predicting, a shift in M&A activity due to the change in administration.
Cramer noted that under the Biden administration, the Federal Trade Commission (FTC) and the Justice Department’s antitrust division have been very strict on mergers, often taking an aggressive stance against any form of corporate consolidation. According to Cramer, companies had grown increasingly reluctant to pursue mergers under Biden’s regulatory approach, as they faced the uncertainty of lengthy court battles with little assurance of success.
“And that’s why when Trump won in November, it became very obvious that we were looking at a deluge of M&A deals and these companies couldn’t even bring themselves to wait for inauguration day.”
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“Alright, so what do we make of this wave of deals? First, I gotta say, it’s just nice to see some mergers again and while this deluge was widely anticipated because of the change in administrations, it’s still good to see some confirmation.”
Cramer said it made him more confident in predicting that M&A deals will continue to increase, which is one reason why he recently added Goldman Sachs stock to his Charitable Trust portfolio as it has a major M&A advisory business that had been relatively dormant under the previous administration. He urged investors to consider buying the stock, noting that it’s an excellent opportunity.
More generally, Cramer expressed satisfaction in seeing so many companies once again pursuing mergers that make sense for their businesses. When examining the deals announced in early January, Cramer pointed out that while some of these deals might have faced challenges under Biden’s administration, most appear justifiable.
“So the bottom line: Gotta tell you, I’m just glad we’re back to a place where reasonable arguments like this will be considered fairly by the antitrust regulators rather than the situation we had under Biden where every takeover is considered anti-competitive until proven otherwise.
That’s very good news for the whole market, as lots of stocks will be going away. Given that we have so few IPOs, there won’t be a lot of new stock to replace it and a supply shortage, well, that is always good news for investors.”
Our Methodology
For this article, we compiled a list of 8 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 8. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A refinery manager walking through an array of pipes and pumping systems, recognizing the company’s vast refining power.
Phillips 66 (NYSE:PSX)
Number of Hedge Fund Holders: 39
Discussing Phillips 66 (NYSE:PSX) during the episode, Cramer said:
“And listen, that’s not even an exhaustive list of M&A activity this week. Well, on Monday, Phillips 66 announced a deal to acquire certain privately held natural gas infrastructure assets for over $2 billion… Looking at the transactions we’ve seen just this week, while some of them likely would’ve been challenged by Biden’s ideologically driven regulators, most of them seem pretty justifiable. All of them make great business sense…”
Phillips 66 (NYSE:PSX) is an energy manufacturing and logistics company that operates internationally, involved in the transportation, storage, refining, and marketing of petroleum products, as well as the production and sale of chemicals. On January 6, it announced that it had entered into an agreement to acquire EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP for $2.2 billion in cash. These entities own subsidiaries and assets, including long-haul natural gas liquids (NGL) pipelines, fractionation facilities, and distribution systems. This transaction is expected to immediately increase earnings per share once it closes.
The company has focused significantly on expanding its NGL capabilities as it expects that NGL output will surpass crude oil production growth by the end of the decade, driven by strong demand from petrochemical manufacturers. CEO Mark Lashier commented that the acquisition optimizes the company’s Permian NGL value chain and will improve its ability to provide comprehensive flow assurance to producers.
He added that the deal is expected to generate returns that exceed the company’s hurdle rates. Despite the acquisition, Phillips 66 (NYSE:PSX) does not expect to increase its 2025 capital program, even as EPIC NGL works to expand its pipeline capacity.
Overall, PSX ranks 5th on our list of stocks that Jim Cramer is watching. While we acknowledge the potential of PSX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PSX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.