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Units of NuStar Energy L.P. (NS - Free Report) hit a 52-week high of $55.15 during yesterday’s trading session. The stock, however, closed the session at $54.90, which reflects a strong year-to-date return of 7.8%. The average trading volume for the last three months aggregated 433,200 units.

Why the Bullishness?

NuStar Energy has a diversified asset base and robust distribution-growth prospects. A strong pipeline of organic growth projects and contribution from acquisitions provide the partnership with an above peer-group average distribution coverage ratio. In 2014, the partnership expects to reach a one-to-one distribution coverage ratio.

Furthermore, the majority of NuStar Energy’s business is derived from an attractive set of fee-based storage and transportation assets. The partnership plans to focus more on its fee based activities to reduce earnings volatility. Keeping with this objective, last month, the partnership sold its remaining voting interest in the asphalt joint venture, further reducing its exposure to the margin-based activities.
More recently, NuStar Energy entered into two long-term contracts to lease light crude oil storage at its St. Eustatius and Pt. Tupper terminals. These may prove to be value additive for the partnership.

Also, in the past years, NuStar Energy has invested handsomely on several internal growth projects that are likely to add to the partnership’s future profitability. The partnership intends to invest $370 million to $390 million in growth projects in 2014 as well with key focus on the pipeline segment.

Zacks Rank & Other Stocks to Consider

In spite of all the bullishness, we remain cautious on the disappointing numbers reported by NuStar Energy in its fourth quarter results. Additionally, the partnership disclosed that while it expects the pipeline and fuel marketing segments to outperform the year-ago quarter results in the first quarter of 2014, the storage segment may not match up to the year-ago quarter level. All these factors are incorporated in NuStar Energy’s Zacks Rank #3 (Hold).

Meanwhile, one can consider better-ranked players from the same industry like Valero Energy Partners LP (VLP - Free Report) , Spectra Energy Partners, LP (SEP - Free Report) and Magellan Midstream Partners LP (MMP - Free Report) . While Valero Energy Partners sports a Zacks Rank #1 (Strong Buy), Spectra Energy and Magellan Midstream hold a Zacks Rank #2 (Buy).

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