6/11/13: Portfolio Changes for NRGM, GEL, VNR, KMI, ETE, BPL, DTM


The latest issue of MLP Profits includes the following portfolio changes:

Inergy Midstream LP (NYSE: NRGM) is downgraded to a Hold following the announcement of its merger with Crestwood Midstream Partners LP (NYSE: CMLP). We like the diversification and scale advantages the merger might confer, but not the premium paid to effective acquirer Crestwood, nor the likelihood that the expanded asset base will accelerate incentive distribution rights payments to Inergy (NYSE: NRGY).

Genesis Energy (NYSE: GEL) is upgraded to a Buy below $55 on the strength of consistent and rapid growth in distributions.  The oil-oriented midstream operator has boosted its payout for 31 consecutive quarters, usually by more than 10 percent over the prior year.

Vanguard Natural Resources (Nasdaq: VNR) is now a Buy below  $28 (down from $30 previously) after a big secondary offering dropped the units back into the middle of their long-time trading range. The units haven’t traded above  $30 in nearly two years. But the 8.7 percent yield remains attractive and relatively secure.

Kinder Morgan (NYSE: KMI) is a new addition to the Growth Portfolio with a buy below target of $42 as the general partner of one of the largest master limited partnerships, with excellent prospects for continued growth in distributions. And because KMI is a dividend-paying corporation rather than an MLP itself, its shares are more suitable for tax-advantaged retirement accounts.

Energy Transfer Equity LP (NYSE: ETE) has been added to the Growth Portfolio with a buy below maximum of $62 as another MLP general partner, one that will garner a growing share of the cash flow from the MLPs under its management as a result of progressively more lucrative incentive distribution rights. Note that, unlike KMI, ETE is itself a master limited partnership.

Buckeye Partners LP (NYSE BPL) is now a Buy below  $70 after resuming increases in distributions in in response to robust operating results.  We’ve increased the buy target to permit incremental additions to stakes in this fundamentally strong MLP.

DCP Midstream Partners LP (NYSE: DPM) is now a Buy below $50, the target going up  in recognition of good results and excellent near-term growth prospects thanks to dropdowns from thriving sponsors.

Stock Talk

Alex Loeb

Alex Loeb

Other services have downgraded LINE and OKS to strong sells. What is yuour current advice? T hanks Alex Loeb



VANGUARD ENERY RESOURCES: ((VNR) So far today, 8/6, a pretty big hit on the stock though it’s off the lows of the day. It got close ($28.15) to the restated $28 entry point. Do you anticipate them getting the coverage back over 1.0 this year and what are your thoughts on their maintaining the current distribution if they aren’t making enough DCF?
It seems that distribution cuts, even small ones, are like a Scarlet Letter for these issues. If most MLP investors are in for the long term for distribution growth and won’t sell due to tax issues, who is doing the selling that drive the price down in such short order?

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