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Two MLPs with great stories that should cause their shares to outperform



February 23, 2013 – Comments (11) | RELATED TICKERS: OKS , NGLS.DL , WPX

I know that I said that I would talk more about my recent real money moves, but I'm about to go out to dinner and am short on time, so I thought that I'd share these two interesting stocks tat I just found in Barron's instead. Both of them are great because they don't just have high yields or dividend growth because that's what the analysts are forecasting.  They have real stories that should cause their shares to rise significantly over the next couple if years.  I love "story" stocks that have catalysts. I just added them both to my CAPS portfolio.  Here's my quick pitches:

 ONEOK Partners, L.P. (NYSE:OKS)

I'm a big fan of companies with below-average distributions or dividend yields that will likely increase significantly in the near future. That's exactly what we have in OKS. 

While its current yield of 4.7% is a little below average compared to its competitors, the company has $7 Billion worth of expansion projects scheduled to come online over the next year or two. That's a lot of growth that will likely translate into a significant increase in its distribution and hopefully in turn its share price.


Targa Resources Partners LP (NYSE:NGLS)

Targa is another interesting MLP that was featured in Barron's recent cover story on the sector. What I like about this company again is there is a story as to why its shares should rise in the future. 

The story with Targa is that it is reshaping its business model towards one that is less exposed to commodity prices. Today around half of the Company's business is exposed to commodity pricing. It has a slew if new projects that are scheduled to come online by 2014, which will reduce its exposure to commodity prices to around 35%. Once the market recognizes this shift in mix to more sable business the company will likely be awarded with a higher multiple, causing its shares to rise and me who priced it in CAPS to be happy :).  

oh and here's a bonus pick that I just remembered I made yesterday: 

WPX Energy, Inc. (NYSE:WPX)

Barron's recently published an interesting article about how the former Williams (WMB) spinoff WPX Energy will be able to return to profitability even without an increase in the price of natural gas by renegotiating terrible legacy mid-stream contracts that it was saddled with over the next two years. That's just the sort of story catalyst that I like to see. 

Any increase in the price of natural gas, which I'm certainly not counting on would be gravy. So would the sale of the company's Argentina assets (yuck). 

Have a great Saturday night everyone! 


11 Comments – Post Your Own

#1) On February 23, 2013 at 11:40 PM, awallejr (38.83) wrote:

OKS I did follow but made my choice with PVR.  PVR is also doing a transformation but their yeild is much higher than OKS.

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#2) On February 24, 2013 at 2:05 PM, TMFDeej (97.69) wrote:

Thanks for the comment and the heads up about PVR, awaller.  You've certainly done well with it, a two bagger.  Can you tell me a little bit more about the transformation going on there?  Having looked at them a long time ago, I think of them primarily as a coal producer.  Are they shifting more towards gas?  It looks like they got hammered recently.  What happened there?  

BTW, I love how you have pitches for all of your picks.


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#3) On February 24, 2013 at 3:14 PM, constructive (99.97) wrote:

Did CAPS eat my comment?

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#4) On February 24, 2013 at 3:15 PM, constructive (99.97) wrote:

I wrote a nice long pitch for TPCA, but its gone now.

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#5) On February 24, 2013 at 3:17 PM, constructive (99.97) wrote:

Deej, here's an obscure idea you might be interested in. Tropicana Entertainment owns 8 casinos with 6000 hotel rooms and 7500 casino games. They trade at a big discount to tangible book value and have $100M in net cash. They are generating tons of cash flow but not much earnings yet.

Icahn owns around 50%, after buying them out of bankruptcy a few years ago. Knowing Icahn, some kind of liquidity event is probably on its way. A likely first step would be listing on the Nasdaq.

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#6) On February 24, 2013 at 3:23 PM, constructive (99.97) wrote:

Full House (FLL) is another very cheap looking casino operator.

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#7) On February 24, 2013 at 3:32 PM, awallejr (38.83) wrote:

Last year PVR bought Chieftain Gathering and expanded its operations in Marcellus.  They are also laying a water pipeline to be used for fracking.  As for coal they never were miners they just lease land out and collect royalties.  With the purchase of Chieftain they have made the strategic move to turn more into a fee based gathering and pipeline play. Their last earnings were weak mainly because of lower coal royalties but their midstreaming income rose dramatically.  They also increased their distribution to 55 cents. The price dropped from a high of $27 to $22 after earnings which I took as a buying opportunity to add.

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#8) On February 24, 2013 at 3:39 PM, awallejr (38.83) wrote:

Did CAPS eat my comment?

Yeah that sometimes happens to me so I learned the trick to open caps in another window to check to see if the post took or not.

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#9) On February 24, 2013 at 5:51 PM, Option1307 (30.53) wrote:


Wow never looked into Tropicana before. Interesting play!!!

Thanks for the idea

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#10) On February 24, 2013 at 8:12 PM, TMFDeej (97.69) wrote:

Thanks for the Trop idea Mega. I'll have to look into that one. Casinos are tough because so many states are strapped for cash they're letting them open up everywhere, increasing competition.  But anything is a buy at the right price. 


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#11) On February 24, 2013 at 8:14 PM, TMFDeej (97.69) wrote:

Thanks for the additional info on PVR. I've got their latest presentation open in another winds and hope to look at it soon. 


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