How to Play the Real Estate Rebound: American Capital Mortgage Investment Crp (MTGE), Kinder Morgan Energy Partners LP (KMP)

Energy

All those new houses will require energy. Many of them are heated by natural gas or oil.

Revenues and earnings in the midstream space are relatively immune to variations in the actual commodity prices, and depend mainly on the volume of material passing though pipelines, which move energy from the production fields to storage and distribution points. That volume is likely to increase because of the gains in housing.

Most of the companies in the midstream area are called master limited partnerships (MLP). One of the more successful MLP’s today is Kinder Morgan Energy Partners LP (NYSE:KMP). KMP (which operates approximately 46,000 miles of pipeline) reported earnings that have grown at an annual clip of about 15% in spite of flat revenues over the last few years. The company and analysts project continued growth in the low double digits over the next few years.

So most industries that are tied to the housing market and its projected continued improvement will probably see growth of their own going forward. Picking the best companies within those industries will pay off.

The article How to Play the Real Estate Rebound originally appeared on Fool.com and is written by Mark Morelli.

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