"Shipping stocks can be a good port in a financial storm," says Ivan Martchev in Leeb's Income Performance Letter. Here, the advisor looks at Teekay LNG Partners (NYSE: TGP).
"Some shippers take their chances in the spot market; these should be avoided. Teekay, however, offers a high yield and lower earnings volatility due to its lower-than-average exposure to the spot market.
"Teekay is well exposed to the growing market for liquidified natural gas (LNG). The growth profile of the LNG market is compelling. The vast majority of the world's natural gas reserves are stranded in Eurasia and the Middle East, while consumption is greatest in the U.S., Far East and Europe.
"Imports of LNG to the U.S., for example, are expected to increase by more than 400%, by some estimates, between now and 2012. Clearly, there is wide-eyed potential growth in the LNG market.
"There are also high barriers to entry in its transportation since it requires huge investments in loading and reliquification terminals for highly specialized ships. Given the support of its parent company -- Teekay Corp. -- Teekay LNG Partners is a force far larger than its relatively small size would have your believe at first blush.
"The company's growth is virtually assured for years to come due to the imbalance in the geographic distribution of reserves and consumers of natural gas. Teekay LNG Partners, yielding 7.7%, is a publicly-traded master limited partnership, which means you should look into the peculiarities of tax treatment of distributions."
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