Hedge funds crowd into midstream corporations and avoid the partnerships despite near-identical assets, so the ten most-held names run from Kinetik at 29 funds up to Williams at 79, every one of them trading below its 52-week high, with the sole partnership on the list paying the most and costing the least.
A pipeline is a toll road. The company charges a fee to move someone else’s gas or oil through steel it already owns. What it earns depends on how much flows through, not on what the commodity sells for at the other end. That is why these businesses are often mistaken for a bet on the oil price when they are closer to the opposite.
Steady fees are also why the sector is built on debt. A pipeline is a long-lived asset with contracted revenue, which is exactly what lenders will fund cheaply,...
