A big part of my job as managing editor of StreetAuthority involves talking with our premium newsletter experts to get a sense of what they like in the market, where they think it’s headed and how they plan to help their followers profit.
That means I get paid to hear from some of the top investing minds in the country on a regular basis. What could be better?
I want to share some of that wisdom. I’m featuring insights and top picks from each of our experts over the next couple of weeks as a way of saying thanks for being a StreetAuthority.com reader.
Today’s pick comes courtesy of Elliott Gue.
The real-money portfolio in StreetAuthority’s Top 10 Stocks advisory actually consists of 15 holdings at the moment, which is a good thing: 14 of those stocks are in the green, with gains ranging as high as 93.5% since the launch of the advisory a little more than two years ago. One of the current holdings — and a stock that’s recommended in the following section — is an energy partnership, a sector that’s right in Elliott’s wheelhouse.
A few years after launching a highly acclaimed energy newsletter in 2005, the official program of the Group of Eight (G-8) summit in Tokyo referred to Elliott as “the world’s leading energy strategist.”
Here’s more from Elliott:
This Partnership May Grow its Dividend by 20% a Year
Since the beginning of May, the yield on the 10-year Treasury has soared more than 100 basis points (1%) to around 2.7% due to growing fears that the Federal Reserve will announce plans to taper the pace of its quantitative easing program as soon as this September. With bonds now offering more attractive yields, the knee-jerk reaction earlier this summer was for investors to sell off stocks offering high yields.
But not all income-oriented stocks underperform in a rising rate environment, and the recent sell-off is an ideal opportunity to buy into some names such as master limited partnership (MLP) MPLX LP (NYSE:MPLX).
Refining giant Marathon Petroleum Corp (NYSE:MPC) is the general partner of MPLX LP (NYSE:MPLX) and owns close to half of the outstanding units. In fact, Marathon Petroleum Corp (NYSE:MPC) placed some of its assets in MPLX before the initial public offering last October. The list of assets includes an ownership stake in 962 miles of crude oil pipelines and 1,819 miles of refined product pipelines located across seven Midwestern states, Texas and Louisiana. In addition, MPLX LP (NYSE:MPLX) owns a crude oil barge loading dock on the Mississippi River in Illinois, oil and refined products storage facilities in Illinois and Indiana, and a butane storage cavern in West Virginia.
Pipelines and storage facilities are some of the lowest-risk assets an MLP can own, and Marathon Petroleum Corp (NYSE:MPC), MPLX LP (NYSE:MPLX)’s “Rich Parent,” guarantees cash flows from its current assets through a series of five- to 10-year contracts with guaranteed minimum fees.
For assets covered by these contracts, MPLX LP (NYSE:MPLX) has no exposure to commodity prices — whether oil is at $50 per barrel or $150, Marathon Petroleum Corp (NYSE:MPC) still pays a fixed fee to MPLX for the right to utilize its storage and transportation assets.
Best of all, Marathon Petroleum Corp (NYSE:MPC) owns 5,000 additional miles of oil and product pipelines, three liquefied petroleum gas storage terminals in West Virginia, 62 refined product terminals, a significant fleet of crude oil barges, and a minority stake in the pipelines now controlled by MPLX LP (NYSE:MPLX).