Tom Sandell’s Top Stock Picks Include Phillips 66 (PSX)

Sandell was also buying oil and gas refining and marketing company Phillips 66 (NYSE:PSX). The industry as a whole is characterized by low earnings multiples, and Phillips 66 (NYSE:PSX) is no exception with trailing and forward P/Es of 8. Wall Street analysts expect enough earnings growth over the next several years that the five-year PEG ratio is well below 1, and the stock is known as one of Warren Buffett’s top picks (find Buffett’s favorite stocks). We’d be interested in doing more research on Phillips 66 (NYSE:PSX) and comparing the company to its peers.

NYSE EuroNext (NYSE:NYX) rounds out our list of Sandell’s top picks. The company’s shareholders have approved a merger with Intercontinental Exchange, as have EU regulators. Currently, NYSE EuroNext (NYSE:NYX) is valued at a small discount to the value of the .2581 shares of Intercontinental Exchange which shareholders will receive in the event of a deal. The fund therefore appears to be engaged in merger arbitrage- while absolute, unleveraged returns from this strategy are low, they may be attractive in annualized terms and tend to have little correlation with the overall market.

Investors who are interested in merger arbitrage plays might want to take a closer look at NYSE EuroNext (NYSE:NYX), then, to evaluate the risk/reward offered by the opportunity. We also think that Phillips 66 (NYSE:PSX) could be a value play and would be worth further research. Of course, income investors could certainly consider the higher-yielding stocks we’ve mentioned here, and certainly if Compuware Corporation (NASDAQ:CPWR) could sustain its current payments the yield of nearly 5%- with a record of private interest in the company in case the stock price sinks too low- it might be a good pick for an income portfolio.

Disclosure: I own no shares of any stocks mentioned in this article.