September Worst Month in History for Energy MLPs: 3 to Buy Right Now

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Needless to say, the past six weeks have been gut-wrenching for investors. What could possibly be worse? The month of September for energy master limited partnership (MLP) investors. According to a new research report from the MLP analysts at Merrill Lynch, depending on the final tally, September was possibly the worst month in history for the MLP sector. They also pose the question, “Could sentiment possibly get more negative?”

The answer is not likely, and the Merrill Lynch team expect a “business as usual approach” to the third quarter midstream MLP cash distribution announcements. While earnings and distributions will be closely watched, one thing is for sure: investors with patience and dry powder may end up making one of the best investments of a lifetime.

We screened the Merrill Lynch list of energy MLPs rated Buy and found three that look particularly enticing now. Don’t forget that MLP distributions may include return of capital.

Buckeye Partners

This top MLP has traded all the way back to levels it was at in March of 2013. Buckeye Partners L.P. (NYSE: BPL) owns and operates a diversified network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage and marketing of liquid petroleum products.

Buckeye is one of the largest independent liquid petroleum products pipeline operators in the United States, in terms of volumes delivered, with approximately 6,000 miles of pipeline and more than 120 liquid petroleum products terminals with aggregate storage capacity of over 110 million barrels across our portfolio of pipelines, inland terminals and an integrated network of marine terminals.

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The Merrill Lynch team noted after solid second-quarter earnings were reported that the performance reflects the stability of the company’s cash flows in what has been and will remain a volatile pricing environment, and they also noted the improved asset utilization. The analysts also cited the strong refined product volumes that helped to offset lower butane blending margins.

Buckeye Partners investors a paid an outstanding 7.95% distribution. The Merrill Lynch price objective is a monster $88. The Thomson/First Call consensus price target is $81.72. Shares closed Wednesday at $59.27, up over 6%.