Leawood, Kansas-based Tortoise Capital Advisors LLC, with $7.0 billion in assets under management, is recognized as a leader in energy infrastructure MLP investment management services to individual and institutional investors. It specializes in investing in publicly-traded energy infrastructure investments, primarily in MLPs that provide essential services in the energy industry by transporting, processing, distributing and storing crude oil, refined products and natural gas. Since revenue from these companies is based primarily on volumes, with relatively low direct commodity price risk, they are able to deliver to their investors a high level of total return, at low commodity risk, and with an emphasis on reliable distributions.
Per their latest 13-F Q3 filing, the fund holds a diversified portfolio of over 88 positions. The fund is focused on the oil & gas sector that accounts for almost its entire portfolio. Between 55%-60% of its portfolio is in mid-caps, another 25%-30% is in large-caps, and the remaining 15%-20% sector is in small-cap equities.
The following are Tortoise's most bullish picks in the oil & gas sector that are also trading at a discount compared to their peers (see Table):
Williams Partners LP (NYSE:WPZ): WPZ is a MLP engaged in the gathering, transportation and processing of natural gas. It is also engaged in the fractionation and storage of NGLs. At $493 million, including the $65 million added in Q3, this is Tortoise's second largest position in the portfolio. WPZ is under-valued and trades at a discount 16-17 forward P/E, and at 3.5 P/B, compared to averages of 19.9 and 2.5 for its peers in the oil & gas pipeline group, while earnings are projected to rise at 18.4% annual rate from $2.66 in 2010 to $3.73 in 2012 compared to the estimated 6.5% average 5-years growth rate for the industry. It pays a dividend yield of 4.8% compared to the average 5.6% for the group. Of the eleven analysts that cover the stock, five rate it at buy/strong buy, five at hold, and only one at underperform.
Magellan Midstream Partners (NYSE:MMP): MMP is a MLP engaged in the transportation, storage and distribution of refined petroleum products in the U.S. Tortoise added $19 million in Q3 to their $393 million prior quarter position in the company, making it the fourth largest position in its portfolio. MMP trades at a discount 19 forward P/E, and at 5.3 P/B, compared to averages of 19.9 and 2.5 for its peers in the oil & gas pipeline group, while earnings are projected to rise at 12.6% annual rate from $2.85 in 2010 to $3.61 in 2012 compared to the estimated 6.5% average 5-years growth rate for the industry. It pays a dividend yield of 4.6% compared to the average 5.6% for the group. Of the nineteen analysts that cover the stock, seven rate it at buy/strong buy, twelve at hold, and none at underperform/sell.
Plains All American Pipeline (NYSE:PAA): PAA is a MLP engaged in the transportation, storage, terminalling and marketing of crude oil, refined products, and liquefied petroleum gas and other natural gas-related petroleum products in the U.S. and Canada. Tortoise added $6 million in Q3 to its $289 million prior quarter position in the company. PAA trades at a discount 17 forward P/E, and at 2.3 P/B, compared to averages of 19.9 and 2.5 for its peers in the oil & gas pipeline group, while earnings are projected to rise at 18.4% annual rate from $3.03 in 2010 to $4.25 in 2012 compared to the estimated 6.5% average 5-years growth rate for the industry. It pays a dividend yield of 5.5% compared to the average 5.6% for the group. Of the fifteen analysts that cover the stock, twelve rate it at buy/strong buy, three at hold, and none at underperform/sell.
The following are oil & gas companies that Tortoise is bearish about (see Table):
Inergy LP (NRGY): NRGY is a Master MLP engaged in retail and wholesale propane distribution to residential, commercial, industrial and agricultural customers, primarily in the U.S. and Canada. At $60 million, this was Tortoise's biggest sell in Q3 from $157 million prior quarter position in the company.
Enbridge Energy Partners (NYSE:EEP): EEP is a MLP formed to own and operate the U.S. portion of the world's longest liquid petroleum pipeline, which transports crude oil and natural gas liquids primarily from reserves in western Canada to refining centers in the Midwest and Ontario, Canada. Tortoise cut $18 million in Q3 from its $302 million prior quarter position in the company.
Enterprise Products Partners (NYSE:EPD): EPD is a MLP engaged in transportation, gathering, processing, and storage of natural gas, natural gas liquids (NGLS) and crude oil. It is also engaged in fractionation for a processing fee mixed NGLs produced as by-products of oil & gas production into their component products. Tortoise cut $5 million from their $613 million prior quarter position in the company.
Energy Transfer Equity LP (NYSE:ETE): ETE owns a diversified portfolio of energy assets, including natural gas gathering and transportation pipelines, natural gas treating and processing assets, and three natural gas storage facilities. Tortoise cut $3 million in Q3 from its $119 million prior quarter position in the company.
Nustar Energy LP (NYSE:NS): NS is a MLP engaged in the terminalling, storage and transportation of petroleum products primarily in the U.S., Canada, the Netherlands, Mexico and the U.K. Besides, it is also engaged in the refining of crude oil to produce asphalt and other refined products. Tortoise cut $49 million in Q3 form its $197 million prior quarter position in the company.
For those interested, Tortoise Capital Advisors offers six publicly-traded closed-end funds, including Tortoise Energy Infrastructure Corp. (NYSE: TYG, Tortoise Energy Capital Corp. ( NYSE: TYY, Tortoise North American Energy Corp. (NYSE: TYN, Tortoise Capital Resources Corp. (NYSE: TTO, Tortoise Power and Energy Infrastructure Fund, Inc. (NYSE: TPZ and Tortoise MLP Fund, Inc. (NYSE: NTG.
Note to Table: The companies selected to be included in both the Top Buys and Sells and Top Holdings categories in the Table were picked on both an absolute basis, i.e. the highest dollar amounts of buys and/or sells, as well as those amounts relative to their market-cap. That way, the list is not biased towards the largest companies in the group.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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