Billionaire Stephen Mandel Likes This Pipeline Stock

LONE PINE CAPITALAccording to a filing with the SEC, Lone Pine Capital has acquired a total of 2.2 million shares of SemGroup Corp (NYSE:SEMG), an oil and gas pipeline and storage company with a market capitalization of $1.6 billion. Our database of 13F filings shows that Lone Pine had not owned any of the company’s stock at the end of June, so this was a relatively recent decision by the hedge fund to get involved in the stock. Lone Pine is managed by billionaire Stephen Mandel, who previously worked at Julian Robertson’s Tiger Management, and has about $17 billion in AUM. See Lone Pine’s favorite stocks from the second quarter.

In SemGroup’s report for the second quarter of 2012, it announced revenue figures that were slightly down from the second quarter of 2011. Because the company’s interest expenses were down, however, it turned a $12 million net loss from a year ago into $7 million in net income (comprehensive income did remain negative). For the first half of the year, SemGroup Corp reported 9 cents in earnings per share partly because of a bad Q1; despite improvement in the bottom line, cash flow from operations was down due to changes in operating assets and liabilities. The stock currently trades at 26 times forward earnings estimates, as Wall Street analysts predict that its business will do considerably better in 2013. There is certainly some opportunity for growth as continuing drilling activity in the U.S.- where SemGroup does most of its business- must be matched by accompanying midstream infrastructure, but we’re wary of seeing quite this much dependence on improved earnings.

At the end of June, Doug Silverman’s Senator Investment Group reported a position of 2.5 million shares of SemGroup Corp in its 13F portfolio; this was a 23% increase from what that hedge fund had owned at the beginning of April (find more stock picks from Senator Investment Group). Third Avenue Management, which is managed by Marty Whitman, increased its stake slightly to a total of 1.5 million shares (research more stocks that Third Avenue has been buying).

Other pipeline companies in the same size range as SemGroup (between $1 billion and $3 billion of market cap) include Copano Energy, L.L.C. (NASDAQ:CPNO), Genesis Energy, L.P. (NYSE:GEL), Atlas Pipeline Partners, L.P. (NYSE:APL), and Tesoro Logistics LP (NYSE:TLLP). Of these four peers, Atlas and Tesoro have forward P/E multiples in the high teens. Atlas’s third quarter results are in- that company had its revenue decline 21% versus a year earlier, and once again underperformed earnings expectations- while Tesoro’s second quarter was characterized by much higher numbers in both sales and net income. With Tesoro also having a relatively low trailing earnings multiple as well, at 20, we’d watch to see how the last quarter looked for it. Copano and Genesis carry forward P/Es of 32 and 24, respectively; Copano’s business was down in the second quarter compared to the same period in 2011, while Genesis saw modest increased in revenue and earnings. As a result Genesis might be a good pipeline stock to follow as well. All four of these peers have high dividend yields: Tesoro is the only one paying below 5.5% at current prices, with a yield of 4.2%, and Copano pays a very generous 7.4% to investors. As such these companies would be good for an income investor to take a closer look at (though we would note that their betas are often around 1 or even considerably greater).

We think that there might be better opportunities in the pipeline industry than following Lone Pine into SemGroup. Genesis and Tesoro look like relatively better buys than their peers, though their valuations are still quite high and we’d probably only recommend them if an investor places considerable weight on dividend payments.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!