Phillips 66

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Topping the new buys list last quarter was Phillips 66 ( PSX), the independent refiner and petrochemical firm that began trading on the NYSE earlier this year after splitting off from ConocoPhillips ( COP). The split turned PSX into the downstream arm of COP, focusing on the part of the process that happens after the oil and gas come out of the ground.

Berkshire piled up on shares of PSX last quarter, picking up 27.16 million shares for a 4.2% stake in the firm that's worth nearly $1 billion right now.

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Clearly, Buffett likes Phillips 66.

That may come as a surprise though. Downstream energy businesses typically come with lower margins than successful E&P businesses do, meaning that PSX is the low-return side of the operation. But don't think that Phillips 66 is merely a refiner and gas station chain. Phillips also owns a lucrative chemicals business and more than 62,000 miles of pipelines. If the firm decides to, it could easily push the nat gas unit into a tax-advantaged structure (think MLP) for investors' benefit.

Ultimately, there's more to PSX than meets the eye. That fact that it was split off from a profitable supermajor doesn't hurt either. The firm is well-capitalized and boasts a portfolio of refinery properties that have big structural advantages over competitors. With shares within a buck of new highs, investors had better look sooner rather than later.

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