On Nov. 15, I recommended Targa again, this time for MLP Profits subscribers who were already being urged to invest in Targa Resource Partners (NYSE: NGLS), the MLP for which TRGP serves as a general partner. Buy TRGP for its faster dividend growth and greater leverage to the partnership’s strong business fundamentals I argued. Buy below $85 I suggested, and that opportunity lasted a little over a month.

So why am I finally getting around to recommending TRGP in the Energy Strategist, now that the pick is up 13 percent in the MLP Profits portfolio, 31 percent since the PF recommendation and a whopping 61 percent including distributions over the last 12 months? Because enough has changed over the course of the year that, despite the big gain, the ratio of reward to risk remains attractively high.

The cash flow of Targa Resource Partners from which Targa Resources derives its dividend has continued to grow quickly, and now looks more secure than ever as US gas and natural gas liquids production ramp up alongside plans to export the purity components of that NGL stream after fractionation.

Source: company presentation

Targa’s  gathering systems in the Permian basin and the Bakken are poised to benefit greatly from the continuing increases in US oil and gas production. Meanwhile, its rapidly expanding fractionation and terminal capacity along the Gulf Coast leaves it well placed to capitalize on the NGL boom.

The partnership’s third-quarter revenue was up 12 percent year-over-year while distributable cash flow jumped 43 percent as additional processing and loading capacity came on line.  As the general partner,  TRGP has capitalized on that momentum by increasing its dividend 30 percent last year, and promises another 25 percent boost in 2014. Its incentive distribution rights entitle it to 48 percent of the incremental gain in distributions to NGLS partners. Yet TRGP’s market capitalization is 30 percent lower than that of NGLS. The more NGLS grows, the more TRGP will benefit disproportionately, the main reason shareholders have been eager to sign up for the lower yield.

But the yield and the faster growth leave out another reason to invest in TRGP in addition to NGLS. As a general partner to NGLS, TRGP would be the more valuable entity to own in a buyout, which is hardly improbable. Targa’s rapidly expanding Galena Park liquefied petroleum gas export terminal, located near the Gulf Coast fractionation hub in Mont Belvieu, Texas, could fetch a premium as a strategic asset, and its gathering pipes along the Louisiana coast may also become more valuable as the flood of natural gas liquids into the region drives a boom in petrochemical production. Shares jumped Wednesday after Morgan Stanley upgraded them to Overweight from Equal Weight. Last month, Goldman Sachs initiated the stock as a Buy with a $97 price target. We think Targa still has plenty in the tank, and are adding it to the Growth portfolio. Buy TRGP below $97.

Western Refining (NYSE: WNR) is another recent MLP Profits pick that has fared well, returning 10 percent in five weeks. It’s being added to our growing stable of refiners based on cheap valuation, upside exposure to the widening crude spreads and the likelihood that all of its refineries will eventually be transferred to an MLP, fetching a higher earnings multiple as a result.

Western operates refineries in El Paso, Texas, and Gallup, New Mexico, with a combined throughput capacity of 153,000 barrels per day. The refineries run largely on sweet crude and are well-placed to buy it at a discount from producers in the Delaware basin of west Texas, which is part of the Permian basin.

On Nov.  12, Western Refining announced an agreement to pay $775 million to the private-equity sponsors of Northern Tier Energy (NYSE: NTI) for the general partner interest in that MLP, along with the 38.7 percent of its limited partner units not held by the public. The deal gives Western Refining control of Northern Tier’s 89,500 bpd refinery in St. Paul Park, Minnesota, along with related pipeline and distribution assets as well as a chain of retail filling stations.

Curiously, Northern Tier backers TPG Capital Management and ACON Investments sold out at a 6 percent discount to the price of their LP units on the eve of the announcement, with control of the GP thrown for good measure. This caused WNR’s share price to spike 9 percent on the news.

It has continued to rally since, to a record high above $42 a share as of Monday before pulling back a bit. Yet WNR still trades at a 3.6 multiple of its Enterprise Value to EBITDA, well below NTI as well as industry leaders Marathon Petroleum (NYSE: MPC) and Valero (NYSE: VLO). One way to shrink the gap would be to drop down WNR’s own refineries into Northern Tier’s variable distribution MLP, where they would likely fetch a more generous valuation based on their distributions.

Even if this move doesn’t come to pass soon, Western Refining will have diversified on the cheap and will remain Northern Tier’s general partner. Though both entities reported disappointing third-quarter earnings, the current market environment is looking healthier now that the discounts on domestic crude have widened and gas prices firmed. As an added bonus, short interest in WNR stood at a massive 33 percent of float as of Nov. 15 and was only down to 28 percent as of Dec. 13. The short-covering likely has further to go. We’re adding WNR to the Aggressive portfolio; buy below $46.