Secular Trend: Best-of-Breed Pipeline Firms


Oil/gas pipeline firms tend to have nice dividend yields and relatively steady revenues. Due to the secular forces at work, it's a good bet they'll continue to be profitable investments over the long term.

In compiling this watch list, I leaned on a few simple criteria. Each company must have:
• Wide moat rating (Morningstar) â€" this decision pretty much took care of itself, for the reasons mentioned below
• C or better stewardship grade (Morningstar)
• C or better stock grade (Navellier)

The reason for the apparent redundancies in the list is that many of these companies are organized as GPs/MLPs. This gives investors a couple different options depending on whether they're seeking mainly income or growth, among other considerations. Some background info:

Pipeline operators tend to be profitable as all get out. It seems to be a lot easier to make $ by moving and storing oil/gas than by extracting or refining it. Plus a network of pipelines and terminals isn't such an easy set of assets for a potential competitor to duplicate (which probably explains why the widest moats in the oil/gas industries tend to be found here). When the markets aren't chasing the flavor of the month, they tend to revert back to fundamentally sound companies like these.

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