What a difference a year makes. Last year at this time, the Alerian MLP Index was up 11% higher than it currently is, and investors were giddy at the annual NAPTP conference, which is the largest master limited partnership (MLP) conference. This year while sentiment is improving, caution still remains and stock selection will be the key going forward as the sector continues to heal.
A new research report from Deutsche Bank offers a synopsis of the conference, and one interesting item was that some of the biggest players in the industry did not attend this year. Key talking points were valuations, how the marketplace will respond to recovery, and private letter rulings or guidelines.
Here are the four top pick MLPs to buy according to Deutsche Bank. Investors need to remember that MLP distributions may contain return on capital.
Energy Transfer Equity
Energy Transfer Equity L.P. (NYSE: ETE) had a director step up to the plate near the end of last year and make a gigantic insider purchase. Kelcy Warren bought a total of 1,178,567 shares of the company stock at prices 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. ETP also owns 100% of Panhandle Eastern Pipe Line (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 Deutsche Bank price target is $95. The Thomson/First Call consensus price target is lower at $82.67. Shares closed Tuesday at $69.17.