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The One Way Bets, Part 1A: Why Enterprise Products Partners Is My Largest Position

BeanKounter Capital profile picture
BeanKounter Capital


  • Today's political climate isn't favorable towards energy, which makes EPD's existing asset base even more valuable.
  • If I could only own one stock for the next 5 years, EPD would be it.
  • Insider ownership and a 23-year streak of distribution increases prove that EPD is a best-of-breed pipeline operator.
  • EPD is materially undervalued and currently trading below 6x cash flows with an 8.2% yield.

Geothermal pipes by Nesjavellir Plant, Iceland

Arctic-Images/DigitalVision via Getty Images

The One Way Bets

This article is part one of my first One Way Bet for 2022 and beyond. Over the last year, I have been working to get more concentrated in my favorite investments, as I think we are headed for an

This article was written by

BeanKounter Capital profile picture
You can find me on Substack at Kontrarian Korner: CPA and former Big 4 auditor. I break down investments in qualitative and quantitative terms, and I look for investments that will compound my money over the long term.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of EPD, MMP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (154)

Thank you for the article.
It is hard to tell with the energy secretary, whether she is a fool or a knave. Leaning toward the former, and that the knaves (the evil planners chose the knaves) picked her for the position.
jokingme profile picture
3.3% increase on a stock that yields 8%. I'm happy.
First purchased in 9/2008. Added over the years, some at bad prices, some at good prices.
12% average yield on holdings with weighted average holding period of 8 1/3 years.
To paraphrase:
They can have my EPD shares when they pry them from my cold dead fingers.
BeanKounter Capital profile picture
@jokingme Hand them off to the kids and then they can get the step up in basis. That's the best way to stick it to the IRS.
@BeanKounter Capital My plan exactly.....
EPD raises quarterly distribution to $1.86 per annum. Link provided.

@Wolfram1964 considering the last couple years and inflation it is modest but about what I expected.
Edward J. Roche profile picture
@Wolfram1964 Why isn't SA reporting this???
houtex profile picture
@Edward J. Roche
Relax. They did. The hamsters just needed to wake up and start the wheels spinning.
About that political climate regarding oil and NG: I'm sitting on a dairy farm in central Virginia in the aftermath of a terrible snowstorm (we got 14 inches of dense, wet, gluey snow that smashed millions of pines). The power has been out for 4 days. Tomorrow night the temperature will be around 8 or 9 oF. The only thing keeping us alive is our Honda generator humming away outside, and the gasoline that runs it in my array of 5-gallon cans. What will happen to folks like us during events like this when you just can't buy gasoline anymore, or at least not readily? Am we going to power the house and well and outbuildings with solar panels? What about when they're buried in crushing snow and it's cloudy for days, even weeks, on end? What about when the grid goes out because it's been overtaxed by zillions of suburbanites charging their cars? I guess you know whom I'll be voting for.
@Doggywag Abigal Spanberger?
Longbottom profile picture
Thanks for the article (including the rant at the beginning; I'm of the same mind and in the same region)! I'm still underinvested in EPD but do hold some units; it's a solid company.
BeanKounter Capital profile picture
@Longbottom I figured readers would either love it or hate it, but I have always been a straight shooter. While everything else is frothy, EPD and MMP are two perfect anti-bubble picks that just happen to be out of favor currently.
Great article. My question: I own shares purchase at $22. If it goes up to $24.20, representing a 10% increase, should I sell and wait for a drop back to $22 again and repeat? The 10% increase represents a larger gain than the current yield, so why not try the channel formula and hope for a repeat or threepeat? Or, at this point do you think if the share price reaches $24.20 that another opportunity to acquire at $22 will not occur? I actually have a buy on the table at $18 just in case something spooks the market and we get a flash crash. For the record, I would be happy receiving an 8% return on all my investments until the day I die, so this is kind of a win-win scenario in my question; just curious as to your thoughts on taking the profits or settling for the yield and the increased valuation. And, of course, if I am DRIPing then maybe I'm buying new share that are ever more costly and possibly lowering my yield (particularly when a dip or correction happens). This simple stuff can get quite complicated!
BeanKounter Capital profile picture
@leephx I'm not dripping, but I have been adding aggressively the past six months. With my favorite positions, I'm not really that active with trading them unless I'm adding shares. I think it's a strong buy under $25, so that's what I have been doing.
@leephx Off-hand I think if you try to trade an MLP like that you'll just go crazy at tax times apportioning the basis adjustments across the different lots. If you want to do that sort of thing strongly suggest you look at doing it with options.
@JustGiveMeTheDividends How do partial sales actually work? Can I do tax loss harvesting with MLPs? Does the specific tax lot share identification matter when selling MLPs?
Vadersaver profile picture
I've been watching this one for a bit and like it.
I also like Enbridge as well.
Have you looked at them lately?
BeanKounter Capital profile picture
@Ron in NS Owned it but I was getting frustrated with Canadian dividend withholding and I wanted to buy more EPD. If you want to own pipelines but avoid the K-1, ENB is a good choice. Would recommend retirement accounts for ENB though
Bultaco-13 profile picture
I’m confused…does EPD generate a K-1 or no?
@Bultaco-13 Yes. Been an investor in EPD for 7 Years. You get a K-1 each year.
Bultaco-13 profile picture
@Wolfram1964 Thank You.
@Bultaco-13 YES and its no big deal
charly333 profile picture
The main insider and owner, Randa Duncan Williams, bought very little and has an almost unchanged position since before Covid. I have different numbers here:

Good thing is no sales though.
I have no clue about the sector, technically the stock is short term overbought, that's why I was reading about the stock.
ChuckXX profile picture
@charly333 If you scroll thru your chart that you attached towards the bottom Randa purchased a boat load of EPD at much higher prices. In the $25+ & $26+ range. She obviously understands and believes whole heartedly in the company.
charly333 profile picture
@ChuckXX Thank you. Yes, she bought a bit. But in the end, over 2 years she increased her holdings from 700 to 702 million. She sure has enough shares, I understand that. The relatively small buys are for a nice look imo.
@charly333 She inherited billions in EPD stock from her famous father. She might not need anymore.
There's very little growth for this one
@BeanKounter Nice article, logical mind in illogical market. Today was a nice
day to for my top three investments EPD,ET and PSXP and my other 5 MLP’S.
I was reading some of your replies tonight, thank you for trying to truly help people, so many writers either have nothing to offer in actionable advice.
The comment about power you mentioned Nuclear and Gas being so
important because of the reality of Solar and Wind.
I had an interesting conversation in the check out line with my ex Senator.
My background is Math/Physics a true slide rule carrying big glasses stereotype. In the sixties we all were for Nuclear Power, one big problem
spent fuel, but we were young smart and sure someone would figure out a
solution. The line was long and we got to the Energy Problem, Texas being
in the news. I used a leading question about the Worlds most important
Environmental problem. Expecting “Global Warming”, she said “Yucca Mountain” as short hand for the spent fuel issue.
She is the only person I have talked with who fully understood why at this point Nuclear is off the table, when your digging a deep hole for yourself stop.
I won’t try to fully cover this issue here, since you mentioned it as possible,
a little research will take it off the list.
I love my Earthism friends but bless them they are truly Mathematically impaired, they think .000118 increase in CO2 over the last 250 years will
destroy the Earth someday when radiation could make say New York and the whole Northeast area around the recently closed Indian Point Nuclear Plants
unlivable tonight. 59 years of poorly stored spent fuel right where it was
produced. Every Nuclear plant the same, us bright young guys left out
the biggest variable Politicians. My smart ex Senator couldn’t stay, IQ
was just to high.
Keep up your efforts to help others.
My Best

BeanKounter Capital profile picture
@John749 Appreciate the compliment. Every energy source has pros and cons, and that's why I think we need the right mix to make things work as the population grows. I think EPD is one of the best anti-bubble picks investors can make right now and is a position I want to continue to build.
@BeanKounter Capital Fukushima will begin releasing radioactive water this year, from 137 million pounds stored currently. Every day more contaminated water is produced. Fukushima can never be habitable again. This is on top of the on going ground water spread. The spent fuel was even more serious than the cores melting into the earth.
I wouldn’t call all spent fuel ever produced poorly stored at every nuclear facility a con more like a fatal flaw. Germany closing their last three Nuclear plants in an Energy Emergency is not because they think it’s
just a con. I have had input from a young man who built his own fission
reactor as a teenager, has patented medical advances, he has dedicated his life to fusion research. I simply ask you to again do more research so real choices can be discussed.
Yes I have too much time, sitting around avoiding COVID one more time.
I pre apologize for coming off as preachy, I wouldn’t be poking you if I didn’t think you are smart and obviously a good writer.
My Best
BeanKounter Capital profile picture
@John749 Okay, you mention Germany closing plants as an example. One of the side effects of that decisions is that Russia now has Europe by the balls as their primary source of natural gas. Every country in Europe (except France) is basically planning on using sunshine and rainbows to generate electricity.

I think that there are projects going that use the spent reactor fuel, but don't quote me one that. I remember reading something about it. I'm aware that there are issues with radiation, but I think nuclear needs to be a piece of our electrical grid moving forward.

Thomas Sowell once said that there are no solutions, only tradeoffs. This is definitely one of those situations.
OK. I agree with your reasoning. The reason for not doing more buybacks or really anything with their cash pile in 2021 is as stated- the political chaos and how it might effect MLPs. Patience.
Two comments. EPD does have huge storage assets with product held for both itself and others. While the intent is primarily a steady supply for its own use and export; EPD did make significant $$ during Uri. Last, any article about any MLP really needs to mention the unique tax implications of MLPs and that they are not suitable for holding in retirement accounts or by non-profits of those who are not US residents.
BeanKounter Capital profile picture
@arbtrdr If you take the time to go read the Magellan (MMP) article I wrote, you will see that I did address the tax side of it.
Woke like Jesus aka Guy who thinks profile picture
@arbtrdr not good for retirement accounts if you are wealthy and have LOTS of shares (eg enough to generate more than $1000 per year from the holding). Some of us normal people have far fewer shares so it is not a worry. I would be one of those;)
houtex profile picture
@A guy who actually thinks
FYI if you sell 500 units after 3 years you’ll have a UBTI event, based on data I’ve seen. Everyone’s data is different, of course.
scottiebumich profile picture
Any ideas why it's moving so much in today's market?
BeanKounter Capital profile picture
@scottiebumich My article of course :)

Not sure to be honest. I think the selloff in December was partly a tax loss thing and partly investors wanting to avoid the K-1 in 2022, so it could just be a bounce to start off the year.
houtex profile picture
@BeanKounter Capital
I saw in another comment that owning in December doesn’t generate a K-1 for that year since the allocations are made by owners as of the first of the month (and this matches the language in the partnership disclosure). Are you sure that buying last week would have gotten buyers a K-1?
BeanKounter Capital profile picture
@houtex Honestly, no since it won't effect my situation. I think you would get a tax form in the year you purchase a special asset like an MLP though.
Very good analysis 👍
Vandooman profile picture
I am long EPD but largest holding? Mine are Home Depot and Microsoft.

For a long-term investor you need to keep an eye on supplies into the pipelines. If no one is drilling it will decline. Drilling is near historical lows.
BeanKounter Capital profile picture
@Vandooman Both of those are trading near all time highs and all time high valuations. Didn't own Home Depot, but I sold Microsoft last month. I don't think supply will be an issue for EPD as the world realizes that we need fossil fuels more than some people want us to think.
@BeanKounter Capital
The way the auto manufacturers are forecasting converting their fleets to EV's, crude oil use in the developed world looks likely to decline. But EPD is so big on NGL's. No one is going to be cutting back on the products that require NGL's at some step in their manufacture. All that plastic in high tech devices.
I don’t disagree with any of your comments in this fine company- but, they’ve been true for years, and many unit holders are underwater, at least on unit price. I’ve been long EPD and it is one of my larger holdings. If I had to hold one income stock for 5 years, this would be a strong contender, but I’m not sure more growth oriented companies wouldn’t be better over a 5 year period. Nevertheless, regarding EPD, you did stroke my confirmation biases! Thanks for publishing.
BeanKounter Capital profile picture
@j2d2 No problem. Investors are only underwater on EPD because of the extreme current undervaluation. I think the distribution is reason enough to hold this stock, and the price appreciation kicker should materialize in due time.
Gained another follower. Love the honesty about what a f4cked up country/world we now live in.

While I do not equate ET to EPD as a best in class, I think ET has a great chance to be a multi-bagger over the next five years. Hopefully their management will stay the course on reducing debt, buying back cheap stock and raising back the dividend to 2020 levels in the coming years. Their Enable acquisition is going to be viewed as a great buy over the next few years.

Buying EPD in the lower $20s will be looked back on in 5-10 years as a no brainer. Plus you lock in the 8+% dividend and have the best management driving your ship. What not to like!
BeanKounter Capital profile picture
@16192292 Appreciate the compliment. I think EPD makes the most sense for me. ET might be cheaper on the numerical side of things, but I'm willing to pay a comparative premium for EPD for the reasons I mentioned in the article.
BAC219 profile picture
Great article. I love your comment, "They just don't understand our country's energy demands, how the world works on a big picture basis, or that renewables like solar and wind have a snowball's chance in hell of meeting our energy needs." I agree completely with this comment. However, the move to electric cars is out of the box and running fast with pretty much every auto manufacturer in the world moving in that direction, some in a big way.

I don't believe the move to electric will effect EPD very much as the primary source of energy for electric is natural gas. However, I am concerned that over the next 5 to 10 years electric cars will bite into the market share of MMP. That is why I sold my long time position in MMP in December and moved the money to ET. Now my big two holdings are EPD and ET. Like EPD the move to electric won't effect ET much either.

Certainly the move to electric will be jeopardized from time to time by the reality that wind and solar are not dependable but I sleep better owning ET over MMP.
@BAC219 You are not troubled by the fact that ET has a relatively more promanent role in the oil pipeline segment? DAPL and the Perimian Express pipelines. I'm not, because I think the Bakken and Permian fields will be producing heavily quite far into the future.
@BAC219 I don't know too much about the energy industry, but never underestimate the power and speed of innovation and technological disruption. Once most vehicles run on electric, the next step might be distributed, local solar generation and new distributed grid storage systems, replacing gas.
Second largest by share count for me. 4th largest by position value. Long EPD
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