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Buy 4 MLPs for Exposure to Best Part of the Energy Industry
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The energy market has witnessed prolonged weakness since mid-2014 after oil and natural gas supply surpassed demand. This forced major stocks to hit rock bottom. However, the scenario has been improving off late with the increase in the prices of commodities. Hence, we believe that it is high time for investors to look at energy MLPs.
Energy MLP
It is a well known fact that MLPs or master limited partnerships deal in natural resources. They have two classes of owners – the general partner (GP) that is basically a major energy firm or investment fund, or limited partners (LP), the unitholders. These entities are exempted from paying taxes at the partnership level and pass on most of their income to unitholders.
MLPs typically distribute nearly all of their cash flows back to unitholders. They are not required to pay a corporate income tax as the tax liability of the entity is passed on to its owners (or unitholders) in the form of a cash dividend (distribution). This allows the MLPs to offer very attractive yields to the investors.
Finally, the assets that these partnerships own – oil and natural gas pipelines and storage facilities – typically bring in stable fee-based revenues and have limited, if any, direct commodity-price exposure. This enables these MLPs to pay out fairly growing distributions.
The MLP Advantage
Considering the potential tax advantages, coupled with their safe and sustainable dividend payouts, MLPs are considered as the ‘safe haven investment’ for energy investors during the ongoing oil rout. In fact, midstream operators – with relatively consistent and predictable cash flows under long-term contracts – have emerged fairly unscathed compared to other energy subsectors. This is clearly vindicated by the Zacks Industry Rank.
Zacks Industry Rank
Among all industries big and small, finding the top-performing ones is not easy. Hence, we have used the Zacks Industry Rank to make our task fairly simple.
A top Zacks Industry Rank signifies that more stocks within that group are likely to see upward earnings estimate revisions, implying a bullish outlook for that industry.
Historically, we have found that the top 50% of Zacks-Ranked Industries outperform the bottom 50% by a factor of more than 2 to 1. So it’s a good idea to leverage the Zacks Industry Rank to shortlist stocks.
The Zacks Industry classification divides the business world into 16 sectors comprising 60 medium or M-level industries and 260 plus or X-level industries. We rank all 260 plus X-level industries based on the earnings outlook for the constituent companies in each industry.
Investors should know that Energy and Pipeline industry – currently ranked #4 (within the top 2%) out of the 265 industries ranked by Zacks – is the top-ranked industry in the energy sector. We have picked four best ranked stocks from this Energy And Pipeline industry.
Our Picks
Headquartered in Tulsa, OK, Cypress Energy Partners LP services include inspection activities for facilities like transmission pipelines, oil and natural gas gathering systems along with gas distribution systems.
The partnership carries a Zacks Rank #2 (Buy) and managed to outperform the Zacks categorized Exploration & Production MLP industry over the last three months. During the aforesaid period, the partnership gained 19%, whereas the broader industry declined by 4%.
Tallgrass Energy GP LP – based in Leawood, KS – primarily provides services like transportation of crude and natural gas in the U.S.
Presently, the partnership carries a Zacks Rank #2 and surpassed the Zacks categorized Exploration & Production MLP industry after improving more than 7% during the above-mentioned period.
Based in Tulsa, OK, Williams Partners LP is an energy infrastructure player that is engaged in gathering and processing natural gas.
It is to be noted that Williams Partners holds a Zacks Rank #2. Although the partnership underperformed the Zacks categorized Exploration & Production MLP industry, the present Zacks Rank indicates that Williams Partners will be able to show price strength in the coming days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Black Stone Minerals LP (BSM - Free Report) – based in Houston, TX – primarily has natural gas mineral interests in U.S.
The partnership carries a Zacks Rank #2 and beat the Zacks categorized Exploration & Production MLP industry after improving nearly 2%.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>
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Buy 4 MLPs for Exposure to Best Part of the Energy Industry
The energy market has witnessed prolonged weakness since mid-2014 after oil and natural gas supply surpassed demand. This forced major stocks to hit rock bottom. However, the scenario has been improving off late with the increase in the prices of commodities. Hence, we believe that it is high time for investors to look at energy MLPs.
Energy MLP
It is a well known fact that MLPs or master limited partnerships deal in natural resources. They have two classes of owners – the general partner (GP) that is basically a major energy firm or investment fund, or limited partners (LP), the unitholders. These entities are exempted from paying taxes at the partnership level and pass on most of their income to unitholders.
MLPs typically distribute nearly all of their cash flows back to unitholders. They are not required to pay a corporate income tax as the tax liability of the entity is passed on to its owners (or unitholders) in the form of a cash dividend (distribution). This allows the MLPs to offer very attractive yields to the investors.
Finally, the assets that these partnerships own – oil and natural gas pipelines and storage facilities – typically bring in stable fee-based revenues and have limited, if any, direct commodity-price exposure. This enables these MLPs to pay out fairly growing distributions.
The MLP Advantage
Considering the potential tax advantages, coupled with their safe and sustainable dividend payouts, MLPs are considered as the ‘safe haven investment’ for energy investors during the ongoing oil rout. In fact, midstream operators – with relatively consistent and predictable cash flows under long-term contracts – have emerged fairly unscathed compared to other energy subsectors. This is clearly vindicated by the Zacks Industry Rank.
Zacks Industry Rank
Among all industries big and small, finding the top-performing ones is not easy. Hence, we have used the Zacks Industry Rank to make our task fairly simple.
A top Zacks Industry Rank signifies that more stocks within that group are likely to see upward earnings estimate revisions, implying a bullish outlook for that industry.
Historically, we have found that the top 50% of Zacks-Ranked Industries outperform the bottom 50% by a factor of more than 2 to 1. So it’s a good idea to leverage the Zacks Industry Rank to shortlist stocks.
The Zacks Industry classification divides the business world into 16 sectors comprising 60 medium or M-level industries and 260 plus or X-level industries. We rank all 260 plus X-level industries based on the earnings outlook for the constituent companies in each industry.
Investors should know that Energy and Pipeline industry – currently ranked #4 (within the top 2%) out of the 265 industries ranked by Zacks – is the top-ranked industry in the energy sector. We have picked four best ranked stocks from this Energy And Pipeline industry.
Our Picks
Headquartered in Tulsa, OK, Cypress Energy Partners LP services include inspection activities for facilities like transmission pipelines, oil and natural gas gathering systems along with gas distribution systems.
The partnership carries a Zacks Rank #2 (Buy) and managed to outperform the Zacks categorized Exploration & Production MLP industry over the last three months. During the aforesaid period, the partnership gained 19%, whereas the broader industry declined by 4%.
Tallgrass Energy GP LP – based in Leawood, KS – primarily provides services like transportation of crude and natural gas in the U.S.
Presently, the partnership carries a Zacks Rank #2 and surpassed the Zacks categorized Exploration & Production MLP industry after improving more than 7% during the above-mentioned period.
Based in Tulsa, OK, Williams Partners LP is an energy infrastructure player that is engaged in gathering and processing natural gas.
It is to be noted that Williams Partners holds a Zacks Rank #2. Although the partnership underperformed the Zacks categorized Exploration & Production MLP industry, the present Zacks Rank indicates that Williams Partners will be able to show price strength in the coming days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Black Stone Minerals LP (BSM - Free Report) – based in Houston, TX – primarily has natural gas mineral interests in U.S.
The partnership carries a Zacks Rank #2 and beat the Zacks categorized Exploration & Production MLP industry after improving nearly 2%.
Now See Our Private Investment Ideas
While the above ideas are being shared with the public, other trades are hidden from everyone but selected members. Would you like to peek behind the curtain and view them? Starting today, for the next month, you can follow all Zacks' private buys and sells in real time from value to momentum . . . from stocks under $10 to ETF and option moves . . . from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trades >>