Energy Business

3 Top MLPs Credit Suisse Recommends Now

Kinder Morgan

This is another top pick at Credit Suisse for clients to buy now, though it is no longer purely an MLP. It is also one of the most recommended in the sector on Wall Street. The company announced last fall the acquisition of all of Kinder Morgan Energy Partners, Kinder Morgan Management and El Paso Pipeline Partners in a series of transactions. The merger plan was comprised of $40 billion in parent-company equity, $4 billion in cash and $27 billion in assumed debt. Some shareholders were opposed to the move, but it was one many on Wall Street saw as brilliant.

In a recent interview, Richard Kinder, the respected leader of the company, said that more mergers and acquisitions could be in store as prices have become increasingly opportunistic. He said the MLP giant would not be making any foolish buys, but that tremendous opportunity could lie in Mexico in the pipeline system there, where the company already has one pipeline.

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Kinder Morgan unitholders are paid a solid 4.35% distribution. The Credit Suisse price target for the iconic industry giant is $52, and the consensus target is $47.69. Kinder Morgan closed Monday at $44.11.

Plains All American Pipeline

This is another one of the top stocks on Wall Street that has had the power to withstand the downturn. Plains All American owns and operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (NGLs), natural gas and refined products. The company owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL-producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, Plains All American handles over 4.1 million barrels per day of crude oil and NGL on its pipelines.

The company also has one of the largest storage asset bases, with over 120 million barrels of liquids storage capacity at the three major hubs located around the country in Cushing, Okla.; Midland, Texas; and Patoka, Ill.

Investors are paid a very sizable 5.41% distribution. The Credit Suisse price target is $65, and the consensus target is lower at $59.30. Shares closed Monday at $50.65.

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Despite the Credit Suisse optimism, they hedge that a little by making the firm’s top picks for clients to buy true industry giants with little chance of failure. With a very pricey market and a volatile energy sector, that is probably excellent advice right now.