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Why Risk-Averse Investors Should Keep an Eye on WMB, KMI, EPD
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Key Takeaways
Midstream players offer stable cash flows, reducing exposure to volatile oil and gas prices.
WMB, KMI and EPD benefit from vast pipeline networks that secure predictable revenues.
Many companies have significant project backlogs supporting future fee-based cash flows.
The oil and energy market is highly volatile, reflecting how most companies in the sector are very sensitive to fluctuations in oil and natural gas prices. However, that doesn’t mean risk-averse investors should avoid the sector. This is because, unlike exploration and production companies, downstream players are not significantly vulnerable to volatility in commodity prices. Hence, stocks like Williams (WMB - Free Report) , Kinder Morgan Inc (KMI - Free Report) , and Enterprise Products Partners LP (EPD - Free Report) are well-positioned to gain.
Why Midstream Players are Not So Vulnerable to Oil
Midstream players have a huge network of oil and gas transportation and storage assets. Shippers usually book midstream assets for a period of time at a pre-agreed price and volume, thereby eliminating price and volume risks of midstream business to a great extent. Thus, cash flows are highly predictable and extremely suitable for risk-averse investors.
Many of the companies or partnerships belonging to the space have a massive backlog of projects, further securing stable cash flows. Thus, with low oil and gas volume and commodity price risks, investors should keep an eye on midstream players.
3 Stocks to Gain: WMB, KMI, EPD
Williams is a leading midstream energy player and is well-positioned to capitalize on clean energy demand. This is because, with its pipeline network spanning 33,000 miles, WMB is responsible for the transportation of significant natural gas volumes produced in the United States. Thus, the company, currently carrying a Zacks Rank #3 (Hold), generates stable cash flows for shareholders.
Kinder Morgan also has a vast pipeline network and is responsible for transporting as much as 40% of the natural gas produced in the United States. Thus, KMI is not only capitalizing on rising clean energy demand but also generating stable fee-based revenues. The company, with a Zacks Rank of 1 (Strong Buy), is also growing its project backlog, placing it at $9.3 billion by the end of the September quarter of this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Products has more than 50,000 miles of pipeline network transporting oil, gas, refined products and other commodities. EPD also has a liquid storage facility with a capacity of more than 300,000 barrels. Thus, the partnership generates stable fees from the assets, leading to stable cash flows for unitholders. Enterprise Products, with a Zacks Rank #3, also has billions of dollars of growth capital developments under construction that secure future incremental cash flows.
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Why Risk-Averse Investors Should Keep an Eye on WMB, KMI, EPD
Key Takeaways
The oil and energy market is highly volatile, reflecting how most companies in the sector are very sensitive to fluctuations in oil and natural gas prices. However, that doesn’t mean risk-averse investors should avoid the sector. This is because, unlike exploration and production companies, downstream players are not significantly vulnerable to volatility in commodity prices. Hence, stocks like Williams (WMB - Free Report) , Kinder Morgan Inc (KMI - Free Report) , and Enterprise Products Partners LP (EPD - Free Report) are well-positioned to gain.
Why Midstream Players are Not So Vulnerable to Oil
Midstream players have a huge network of oil and gas transportation and storage assets. Shippers usually book midstream assets for a period of time at a pre-agreed price and volume, thereby eliminating price and volume risks of midstream business to a great extent. Thus, cash flows are highly predictable and extremely suitable for risk-averse investors.
Many of the companies or partnerships belonging to the space have a massive backlog of projects, further securing stable cash flows. Thus, with low oil and gas volume and commodity price risks, investors should keep an eye on midstream players.
3 Stocks to Gain: WMB, KMI, EPD
Williams is a leading midstream energy player and is well-positioned to capitalize on clean energy demand. This is because, with its pipeline network spanning 33,000 miles, WMB is responsible for the transportation of significant natural gas volumes produced in the United States. Thus, the company, currently carrying a Zacks Rank #3 (Hold), generates stable cash flows for shareholders.
Kinder Morgan also has a vast pipeline network and is responsible for transporting as much as 40% of the natural gas produced in the United States. Thus, KMI is not only capitalizing on rising clean energy demand but also generating stable fee-based revenues. The company, with a Zacks Rank of 1 (Strong Buy), is also growing its project backlog, placing it at $9.3 billion by the end of the September quarter of this year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Enterprise Products has more than 50,000 miles of pipeline network transporting oil, gas, refined products and other commodities. EPD also has a liquid storage facility with a capacity of more than 300,000 barrels. Thus, the partnership generates stable fees from the assets, leading to stable cash flows for unitholders. Enterprise Products, with a Zacks Rank #3, also has billions of dollars of growth capital developments under construction that secure future incremental cash flows.