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ConocoPhillips: A “Value Creation Machine” Says Josh Brown

The troubles plaguing the global economy are far from over but, at least for moment, the stock market seems to have gotten used to them. That's bad news for macro traders but good news for that old-fashioned group who prefer to invest one name at a time.

"A lot more individual stocks are starting to outperform their sectors and the market," is how Josh Brown puts it in the attached clip, adding, "the market's gotten a lot more fun and more rigorous if you're a stock picker."

As befitting his outlook, Brown has a real-live individual stock pick: ConocoPhillips (COP). The integrated energy play is "a shareholder value creation machine," notes the author of Backstage Wall St. Among the moves ConocoPhillips has made to generate returns are:

Making stock buyback announcements then following through:

Plenty of companies make splashy buyback announcements. The dirty little secret is that many of the purchases either never happen or drag on for years. ConocoPhillips is the exception. The company bought back over $10B worth of shares and plans to do the same again in 2012.

Kicking cash back to shareholders:

Between ConocoPhillips and it's soon-to-be spun off refineries, the total dividend is set to exceed 5.5%, higher than last year by more than a third.

Selling off non-core assets:

In May, ConocoPhillips is going to break off its refineries, giving shareholders one share of the new entity for every two shares of the original company. It's a tax free transaction Brown compares to the Marathon Oil (MRO) spin-off of the Marathon Petroleum Corporation (MPC) last year, a deal in which the combined entities then significantly outperformed the industry by a wide margin.

Spin-offs in general are money makers for shareholders, says Brown. "If you held the parent and the child from December of 2007 through the end of last year you made about 37% that's versus negative 15% on the S&P."

Brown also notes that 80% of ConocoPhillips' assets are located in the developed world. This geographic focus makes them a relative safe-haven in terms of production, providing a kicker for the stock if the Middle East gets ugly.

See the video for more details on Brown's trading idea or just to see the man talk in general.