We recently published a list of the Analyst Says These 10 Stocks Can Benefit if Donald Trump Wins US Election 2024. Since Energy Transfer LP Unit (NYSE:ET) ranks 10th on the list, it deserves a deeper look.
Wolfe Research said in a note earlier this month that the odds have shifted in favor of Donald Trump following the first presidential debate. However, the firm believes we can see several “unexpected twists and turns” ahead. Wolfe Research also shared a list of stocks that could be potential winners should Donald Trump become the President of the US.
What could happen if Donald Trump becomes President of the US has been a topic of debate and discussion on Wall Street over the past several months. In late January, when the Russell 2000 index jumped, Zhiwei Ren, portfolio manager at Penn Mutual Asset Management, reportedly said that investors might be flocking to the “Trump Trade.” The Russell 2000 is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell 3000 Index. Ren said, according to Wall Street Journal, that since Trump is a supporter of low interest rates and less regulation, small-cap stocks, which thrive under Dovish economic policies, were reacting positively to the increasing chances of Donald Trump becoming the leading Republican candidate for the upcoming elections.
In this article, we first scanned Wolfe Research’s basket of stocks the firm believes could be potential winners in case of a Trump presidency. From these stocks we picked 10 companies with the highest number of hedge fund investors.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Energy Transfer LP Unit (NYSE:ET)
Number of Hedge Fund Investors: 32
Wolfe Research thinks pipeline company Energy Transfer LP Unit (NYSE:ET) is one of the best stocks to own for a Trump presidency.
Mizuho also added the stock to its top picks list and gave an Outperform rating. The firm set a $20 price target on the stock, saying Energy Transfer LP Unit (NYSE:ET) improved leverage outlook should allow more aggressive capital return beyond the current 3- 5% distribution growth rate.
Energy Transfer LP Unit (NYSE:ET) has an over 7% dividend yield. During the first quarter, the company saw revenue growth of a whopping 13.9% year-over-year. Gross margin increased from 17.7% to 18% year-over-year, while the operating margin expanded from 10.86% to 11%. Cash flow from operations jumped from $3.35 billion to $3.78 billion over the same period.
Energy Transfer LP Unit (NYSE:ET) is being pitched as an AI stock in the energy industry as the rise of data centers will increase energy demand, helping ET. According to an estimate, gas demand for electricity to run data centers is expected to increase by a whopping 8 billion cubic feet a day by 2030.
Last month, Bank of America published a list of stocks poised to benefit from the electrification theme of future technology, driven by AI, data centers and push for electrification. BofA picked Energy Transfer LP Unit (NYSE:ET) for this theme under the oil and gas category.
Energy Transfer LP Unit (NYSE:ET) remains one of the most notable players in the industry. During the March quarter, all segments of ET grew, with net income and adjusted EBITDA increasing by 11% and 13% on a YoY basis, respectively. Energy Transfer LP Unit (NYSE:ET) saw record volumes in its crude pipeline segment.
Energy Transfer LP Unit (NYSE:ET) bulls also argue that just 10% of ET business is exposed to the volatile commodities sector. Energy Transfer LP Unit (NYSE:ET) has also raised its full-year 2024 adjusted EBITDA guidance. Energy Transfer LP Unit (NYSE:ET) expects the metric to total in the range of $15.0 billion and $15.3 billion, compared to the previous range of between $14.5 billion and $14.8 billion.
Energy Transfer LP Unit’s (NYSE:ET) earnings are expected to grow 13% next year and 15% over the next five years on a per-annum basis. The stock’s forward P/E of 9.42 is still lower than the industry median 11.88, which makes the stock undervalued given Energy Transfer LP Unit’s (NYSE:ET) growth projections.
Silver Beech Capital made the following regarding Energy Transfer LP (NYSE:ET) in its fourth quarter 2023 investor letter:
Energy Transfer LP (NYSE:ET) owns and operates the largest and most balanced collection of energy infrastructure assets in the United States. ET’s assets include 125,000 miles of oil and natural gas pipelines, export facilities on both the Gulf Coast and East Coast, and more than 1 million barrels per day of natural gas liquid fractionation capacity. ET accounts for 20% of worldwide natural gas liquid exports. Further, ET is uniquely connected to every major hydrocarbon basin in the United States.
By assembling energy infrastructure to gather, process, transport, and store hydrocarbons, ET connects exploration and production companies (“E&Ps”) with downstream end users such as gas stations, utilities, and export facilities. As an end-to-end midstream solution, ET enables its customers to focus on their portion of the value chain without the burden of significant but essential midstream logistics. ET’s services thus add tremendous value to all constituents of the energy marketplace.
Though natural gas is a relatively clean source of fuel, restrictive federal and state regulations and other permissions severely restrict the building of natural gas pipelines and other infrastructure in North America that would help facilitate abundant hydrocarbon production. Pipelines are by far the cheapest and greenest method of transporting hydrocarbons; pipelines reduce emissions from truck transport and reduce congestion on highways, rail, and shipping routes.
Overall, Energy Transfer LP Unit (NYSE:ET) ranks 10th on Insider Monkey’s list titled Analyst Says These 10 Stocks Can Benefit if Donald Trump Wins US Election 2024. While we acknowledge the potential of Energy Transfer LP Unit (NYSE:ET), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Energy Transfer LP Unit (NYSE:ET) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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