While the earnings season for many of the top S&P 500 stocks will start to wind down soon, things are just starting to heat up for the top energy master limited partnerships (MLPs). It should prove to be an interesting one to boot, as many on Wall Street are braced for what could be some somber reports. The good news is the MLP space has strung together six straight positive weeks during which the Alerian MLP Index (AMZX) index gained 7.3%.
In a new report, John Edwards and his team at Credit Suisse remain positive that despite the rally, which is the longest since 2010, the top stocks in the space still have further upside. They also point out that the segment has just come off two quarters of commodity pricing correction, and three consecutive negative quarters has occurred only once since the inception of the segment. That was back in 1998.
The Credit Suisse team stays with the big boys in the segment with three top picks: Energy Transfer Equity L.P. (NYSE: ETE), Kinder Morgan Inc. (NYSE: KMI) and Plains All American Pipeline L.P. (NYSE: PAA). It is important to remember that MLP distributions can contain return of principal.
Energy Transfer Equity
A director step up to the plate near the end of last year and make gigantic insider purchases here. Kelcy Warren bought a total of 1,178,567 shares of the company stock at price ranging from $49.01 to $53.55. The company currently owns and operates approximately 35,000 miles of natural gas and natural gas liquids pipelines. It also owns 100% of Panhandle Eastern Pipe Line Company (the successor of Southern Union Company) and a 70% interest in Lone Star NGL, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets.
Sunoco, an affiliate of the company, recently purchased eight Pico convenience stores in South Central Texas. Sunoco is the MLP that mainly supplies motor fuel to independent dealers, stores, distributors and commercial customers. Apart from its distribution business, the partnership also involves in the operation of retail fuel units and 150 convenience stores.
Energy Transfer unitholders are paid a 2.8% distribution. The Credit Suisse price target for the stock is $78. The Thomson/First Call consensus price target is also $78. Shares closed Monday at $66.13.