If the post-pandemic market cycle has taught us anything, it’s that bidding up speculative entities in the hopes of even greater momentum can be an effective tactic – so long as you know when to fold ‘em. Looking at some of the original meme stocks, it’s clear that this conventional piece of wisdom continues to ring true. Thus, for sustainable returns, one might consider fundamentally underappreciated enterprises like Phillips 66 (PSX).
Just by mentioning the hydrocarbon energy specialist, PSX stock is liable to elicit groans from the retail investor community. If you want to talk about the fundamentals, the narrative for the underlying crude oil market admittedly appears poor. Case in point is the OPEC+ production cut that launched in early April of this year. On paper, this news item should have spiked demand for crude oil. It did but “black gold” eventually slipped again.
For PSX stock specifically, the trajectory does not look good at all. Since the beginning of this year, shares stumbled more than 10%. In contrast, the benchmark S&P 500 index over the same period gained almost 15%. While the equities market continues a slow but steady march higher, Philips 66 appears in danger of shedding relevance. Nevertheless, for forward-looking market participants, PSX could actually be quite enticing.
Options Traders May Be Seeing the Light with PSX Stock
In the open market on Thursday, PSX stock slipped conspicuously, giving up almost 3% of equity value. Adding to the jitters, the red ink represented the third consecutive day of losses for the downstream energy giant. However, it signaled a curious sight in Barchart’s screener for unusual stock options volume.
Specifically, total volume reached 6,792 contracts against an open interest reading of 79,076. Further, the delta between the Thursday session volume and the trailing one-month average metric came out to 83.02%. Drilling down, call volume hit 3,922 contracts while put volume landed at 2,870. This pairing yielded a put/call volume ratio of 0.73, which leans optimistically.
To be sure, one day’s action in the derivatives market doesn’t justify an entire hypothesis. Nevertheless, it may also be an extremely early signal that sentiment for hydrocarbon-related enterprises – particularly those involved in the downstream (i.e. refining and marketing) component of the energy value chain – may pivot toward a northbound direction.
One big factor that could help could bolster demand is revenge travel. Understandably, it’s a tricky narrative, one with various nuances. However, against a broader framework, consumers still want to travel this year. And while pressures against the consumer economy are rising, that might also counterintuitively benefit the travel sector. Essentially, consumers might benefit from one last hurrah until they’re forced to shut down discretionary spending.
Interestingly, on the same day that PSX stock represented a bullish highlight in the unusual options volume screener, Murphy Oil (MUR) also printed its name on the indicator. Here, the put/call volume ratio was decidedly optimistic at 0.02. So, revenge travel could be a factor. However, an even stronger catalyst may lie on the horizon.
Return-to-Office Pivot Should Settle the Debate
Back when I was a rank-and-file worker in Corporate America, in one of the enterprises I worked for, we enjoyed an employee-friendly policy called “summer hours.” On Fridays during the summer season, people could leave work around 3pm instead of the usual 5pm or 6pm end time. However, less-than-expected financial performances forced management’s hand, ending the policy.
It was good while it lasted. And that’s the same circumstance going on in Corporate America today.
For instance, consider Salesforce (CRM). In February 2021, the company issued a memo that stated in part, “[a]n immersive workspace is no longer limited to a desk in our Towers.” Adding emphasis, “[t]he 9-to-5 workday is dead.”
Now, Salesforce announced that for a 10-day period, it will offer a $10 charitable donation per day on behalf of each employee who comes into the office, according to The New York Times. While the company maintains that nothing has changed regarding its pro-remote-work policy, you have got to read between the lines. If remote work was so great and effective for the bottom line, Salesforce probably wouldn’t offer such an incentive.
Other companies aren’t quite as charitable, who have issued a come-back-or-else style mandate. Increasingly, as a tough economy squeezes the competition, businesses are looking for any advantage. And that involves bringing workers back together to spark collaboration and also accountability.
Absolutely, one of the core elements of the return-to-office mandate is trust. And no, employers don’t trust (at scale) their employees. From the skyrocketing sales of automated mouse movers to people working two full-time jobs unbeknownst to either employer, corporations have every reason to be skeptical about self-reported productivity claims.
In my estimation, it’s only a matter of time before the nine-to-five commute returns. And that would be a most excellent upside catalyst for PSX stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
