Atlas Pipeline Partners, L.P. (APL) and Holly Energy Partners, L.P. (HEP): 2 Under-the Radar-Pipeline Companies

Page 1 of 2

U.S. energy production is higher than it has been in decades, and as a result America’s pipelines and processing centers are booming as well. Giant midstream companies such as Enbridge Inc (USA) (NYSE:ENB) and TransCanada Corporation (USA) (NYSE:TRP) get a lot of press, but across the country there are many smaller, unheralded midstream outfits that may make great investments as well.

These companies may be potential buyout targets, destined for incredible growth, or about to go bust — and they are worth a little research. With that in mind, today we look at two under-the-radar pipeline companies.

Atlas Pipeline Partners, L.P. (NYSE:APL)Smooth sailing ahead?
Atlas Pipeline Partners, L.P. (NYSE:APL) was one of the best performing midstream stocks of 2011, but it was also one of the worst performing midstream stocks of 2012. Investors may be slightly more willing to tolerate erratic periods of unit price performance if Atlas was willing to increase its distribution. And it is.

Atlas announced that it’s increasing its distribution to $0.58 per unit, marking the ninth increase in the past 10 quarters. As fellow Fool Matt DiLallo pointed out last week, a pattern of increasing distributions bodes well for share price over time.

Of course, the underlying fundamentals are what drive that distribution growth, and that’s where investor focus should be this year. Atlas is taking steps to mitigate its year-to-year volatility by increasing its fee-based revenue.

At the end of last year, Atlas announced its plan to acquire Cardinal Midstream. More than 80% of Cardinal’s gross margin is attributed to fixed-fee contracts. Absorbing those assets will go a long way toward smoothing out Atlas’ performance.

Steady as she goes
Holly Energy Partners, L.P. (NYSE:HEP) missed analyst expectations on EPS by $0.01 but beat revenue estimates by close to $10 million. The stock is up nearly 30% over the past 12 months, gaining 15.3% year to date.

Holly Energy has the sort of stable revenue that most midstream outfits are striving for: 100% of all revenues are fee-based, and it has zero exposure to commodity risk. The company benefits from a close relationship with HollyFrontier Corp (NYSE:HFC). The Midwest refiner has a 42% stake in the midstream company and has signed long term pipeline and terminal agreements that guarantee stable cash flows for Holly Energy.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!