When it comes to energy, stick with quality

Enterprise Product Partners may be among the shrewdest oil companies in the land.

By Jim Cramer Feb 7, 2013 9:59AM
thestreet logoNatural gas plant Kevin Burke CorbisIt happened again. Another master limited partnership secondary and another win.

 

This time it is Enterprise Product Partners (EPD) with an 8 million share secondary priced at $54.56, a deal where about a dozen execs and board members so far have filed that they participated in, all with sizable amounts.

 

Of course the money will be used to pay down debt so the company can expand once again.

 

Enterprise Product Partners may be among the shrewdest oil companies in the land. It has major pipe coming in and out of all the important shales: Eagle Ford, Permian, Haynesville, Barnett and Marcellus. It is the pipeline company that has just about the best exposure to the huge petrochemical refineries that crave the natural gas liquids feedstock.

 

It transports an astounding 4.3 million barrels of natural gas liquids, oil, refined product and petrochemicals a day. And it pays 66 cents per unit each quarter, just giving you a 6.5% increase.

 

Like many of the MLPs, Enterprise can't lay down pipe fast enough, even as its vast network would seem to have pretty much every important field but the Bakken covered.

Enterprise is the outfit that with Enbridge is trying to alleviate the Cushing glut that is causing the bizarre dichotomy between the low West Texas price and the high Brent price. These two companies are already pumping 400,000 barrels a day out of Cushing using the Seaway pipe, which, if you recall, used to go the other way but now that there is so much oil going into Cushing there's no room for the stuff. But there's so much more oil that Enterprise is expanding that pipe at a voracious pace.

These master limited partnerships are notorious issuers of stock. EPD is only about a point-and-a-half off its high and it did trade down to $49 from $55 not that long ago on the usual scare that Congress would change the tax status of the company.

 

But I think it's still a decent entry point to get some of this 4.79% yielder. I would put on half and then hope it goes to a 5% yield through price depreciation.

 

Keep in mind this is the Big Daddy of all of the MLPs at $50 billion. It will sell down if another big MLP offers stock. Still, it is the highest quality and has the biggest opportunity of all of them right now, even bigger than Kinder Morgan (KMP) and certainly more than Energy Transfer Partners (ETP), even as ETP yields 7.7%. Trust me, I learned the hard way that the yield cannot make up for the price depreciation when the company isn't boosting the distribution or is as poorly run as ETP.

 

Stick with quality. It's obvious that the insiders sure are. Who am I to say they are wrong? I just hope you get a chance to buy it underneath their price.

 

cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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32Comments
Feb 7, 2013 2:26PM
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When is the most fundamentally sound time to invest in stocks?  When we have 4% dividends, 5% interest rates and 6% unemployment.  Anything outside of these parameters is an imbalance and all will eventually gravitate to these means tested medians.  I know it takes time but these are the numbers.  Let this be your advantage and understand the movements to these are the natural economic givens all business's indeed function best at.  Playing these imbalances is indeed tricky because they are just that, induced imbalances. Eventually these phoney politically influenced movements will die off.  I know it may seem like a long time in an individuals life but over the history of the market the last 15 years will just be a minor blip.  JMHO
Feb 7, 2013 2:12PM
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Remember when the Japanese bought Rockefeller Center, Pebble Beach Golf Course, and a good portion of Hawaii?  They spent a ton right at the top and lost their shirts.  Right now there is a good percentage of foreign money pouring into this market.  These newbies will get to have the same experience as the then Japanese.  The orderly exchange of new money for insider money is happening now, just as it did in the 90's.  Nothing about  pump and dump, headfake rallies, and outright thievery has changed on wall Street.  The only thing changing are the faces of the losers.
Feb 7, 2013 11:52AM
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 They are not wasting any time this morning; at about 1012 hrs manipulators called to accelerate the selling so sell orders are coming in like candy....We are now down over 100 points and these cheating crooks loving it. Be defensive today, the volume is awful and plenty of scumbags, a lethal combination.

Feb 7, 2013 12:08PM
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We are on a major rally !  GO BULLS=False HOPE chains us all to our own SELF-DELUSION=COGNITIVE DISSONANCE=SCREW THE AMERICAN PEOPLE AND THE FUTURE OF THEIR CHILDREN !   NOW THAT IS HOPE AND CHANGE THAT YOU CAN COUNT ON !
Feb 7, 2013 11:20AM
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it's truly interesting that company 401K mutual fund plans AVOID having any funds that follow the energy industry. 

 

for the average guy, 401K mutual funds are the primary way to invest for our future.  yet access to this energy venue is prohibited. 

Feb 7, 2013 12:04PM
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Why not just say "When it Comes to Stocks Stick with Quality"

 

Bobo's advice is ridiculous at best and his performance is dismal.

Feb 7, 2013 3:15PM
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Don't get too excited about this latest rally...Has all the signs of another sucker's one...Hope to be wrong but we call it as we see it...Again, too many scumbags and very low volume...More after the close.
Feb 7, 2013 1:40PM
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Do Wall Street Insiders Expect Something Really BIG To Happen Very Soon?
Why are corporate insiders dumping huge numbers of shares in their own companies right now?  Why are some very large investors suddenly making gigantic bets that the stock market will crash at some point in the next 60 days?  Do Wall Street insiders expect something really BIG to happen very soon?  Do they know something that we do not know? What you are about to read below is startling.  Every time that the market has fallen in recent years, insiders have been able to get out ahead of time.  David Coleman of the Vickers Weekly Insider report that Wall Street insiders have shown “a remarkable ability of late to identify both market peaks and troughs”.  That is why it is so alarming that corporate insiders are selling nine times as many shares as they are buying right now.  In addition, some extraordinarily large bets have just been made that will only pay off if the financial markets in the U.S. crash by the end of April.
http://investmentwatchblog.com/do-wall-street-insiders-expect-something-really-big-to-happen-very-soon/#2yPY68Ri5LYcpker.99


Feb 7, 2013 12:18PM
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Forget energy,  the Euro continues to move in lockstep with US stocks.  The same play is still on and the last 2 months have been HUGE!

Tomorrow, go long on the Euro against the dollar and short stocks as a hedge.  Close out before the end of the day and as always, don't chase the cash.
Feb 7, 2013 9:06PM
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It could have been a lot worse, the market once again showed resiliency; manipulators got their way but weren't as happy as they could have been at the close...Oh well, lets see what tomorrow brings us.
Feb 7, 2013 11:01AM
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Like we said yesterday after the close, scumbags will probably come out of the gate with guns blazing and, that's exactly what they are doing...We are down 50 points already, why? Because they can, because that's their game....Oh well, still very early, lets see if we can keep things manageable...More later.
Feb 7, 2013 5:03PM
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Not sure his mouth and his brain are connected . . .
Feb 7, 2013 1:21PM
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Anybody catch the guy in the Video portal in the middle of Jim's article? Eric Dutram... looks like he's twelve and still lives at home with his mom. Next to this portal are 4 window frames with white guys in suits. You realize that any of these 5 guys couldn't survive a weekend fending for themselves, but know all there is to know about investing. Maybe pre-qualification for entry in the financial sector should have a test-- shoelace tying, water boiling, basic cheese sandwich making. Most of these losers wouldn't make it through.
Feb 7, 2013 1:15PM
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Yup,Home D...Hiring 80,000...10,000 more then normal for seasonal...Love that Company, a great investment...

 

The new Normal for U/E is going to be about 5%, just gonna have to adjust to it..

 

Steve, good luck on any settlement...And diversify those investments; Growth and Value in an IRA or ROTH if you can....You have age on your side for Growth and reinvested dividends..Good Luck.

 

A Pool Table is calling.....And All Hail the "Commander-in- Chief." a good man...

Feb 7, 2013 1:02PM
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Well ABS, yup just stalkin' and trolling.....You forgot that one "H", doesn't it stand for Hussein ??

 

Yeah guess Beyonce, was fine ? Heard and saw she "sang" it all no lipping here...

Even brought back Destiny's Kids.

 

well.....gotta go, you can discuss esteemed presidents with others..

Feb 7, 2013 12:54PM
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I dunno Brutus, not going to forget Energy or several other Sectors to invest in...?

Diversity is the "key" to wise investing....But YOU already know THAT...??

 

I'm sure the FOREX is a worthwhile endeavor, but me thinks it takes time and a lot of constant monitoring...Maybe not ??

 

I would rather have a few orders in and go to a Casino or as a shall do, now go play some 8-ball with the "old guys"...Maybe Casino later( i'm on a win streak, for a change)..??

Feb 7, 2013 12:36PM
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Right DLH........Quality Stocks, are what pay the bills or builds equity investments..

 

Wish I had those ideas when I was 35...maybe I could have retired a couple years sooner ??

Feb 7, 2013 12:54PM
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Is this the summer of recovery, well it's February so not as such.

I think it will be a better summer then the last few, Home depot hiring more and housing prices rising should keep new builds going relatively strong.  Will it be gangbuster 300k + per month on jobs, most likely not.  A deal on spending cuts would help with uncertainty/confidence but that might be asking too much.

Feb 7, 2013 11:58AM
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We are quite satisfied with Kinder Morgan....

 

With a 35% gain on FMV,appreciation; And a low of 5%+ dividend(because of value change)...

It is roughly a 40% plus gainer...NOT including previous years divs..Plus sales/buys on ups/downs.

The Energy Company that just keeps on giving and expanding..

 

STEVE..Don't think they will offer MLPs and LPs in 401Ks because of tax handling, they are different.

Which is what many of these Companies are....They pay back "cash distributions" and not really a dividend per se....Filing K-1s; You would be receiving "capital back" from your original investment.

Put some energy investments in your IRA or other portfolios.

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