"Natural gas is one of the world's most-sought-after fuels; not only is it cleaner burning and more efficient than traditional fossil fuels, it's also more efficient to transport," says Keith Fitz-Gerald.
In his always-intriguing The Money Map Reporter, he explains, "Our latest featured idea is Bermuda-based Teekay LNG Partners LP (NYSE: TGP), a liquid natural gas shipper which we consider a safe port in any economic storm."
"Many investors don't realize that liquid natural gas (LNG) comes from Indonesia, Malaysia, Qatar and other faraway places – transported by specially designed ships – and that we don't have the industrial capacity to meet modern-day demand.
"Teekay LNG Partners LP is a publicly traded master limited partnership formed by Teekay Corp. (NYSE: TK), a provider of international transportation services for petroleum products.
"The company provides marine transportation services for LNG through a fleet of ships that it owns or operates under various long-term contracts known as 'time charters.' These 15 to 20-year pacts are reached with such major energy companies.
"Unlike spot-rate contracts that are subject to short-term market fluctuations, this company's contracts include 'adjustment provisions' to keep pace with inflation, a shrewd innovation that helps to keep this firm's revenue steady and margins consistent in all kinds of stormy economic seas.
"Because it was formed by Teekay, Teekay LNG has a corporate lineage that gives it stability and an operational expertise to draw on.
"The parent company – which has a commercial armada of more than 200 ships and operates in 16 countries – formed Teekay LNG to utilize its shipping expertise to break into the liquid natural gas and liquid propane markets.
"It's important to note that TGP doesn't speculate when it comes to doing business – they do everything organically, meaning TGP doesn't buy or build a ship until it has a signed transportation contract in place.
"TGP's LNG carriers are custom-built to take on liquefied natural gas at liquefaction facilities situated at one spot on the globe and then transfer that fuel to re-gasification plants or other types of LNG shipping terminals at another point elsewhere in the world.
"In contrast to competitors who operate older, single-tanked ships, TGP's LNG carriers are built with a special membrane-containment system that allows for expansion and contraction without overstressing the containment membranes -- a really important safety feature.
"Also, its vessels are an average of four years old – versus 14 to 16 years old for the LNG carriers its competitors operate. That gives TGP a less-expensive ship to operate and higher gross margins per cubic foot, gallon or ton carried as a result.
"According to the U.S. Department of Energy, LNG capacity has grown by 44% in the last five years and may grow as much as another 50% in the next five. For that reason, this shortfall in shipping capacity remains a source of additional higher-priced, long-term contracts for TGP.
"TGP sports a $1.3 billion market cap and was recently trading just above its 52-week low. But don't expect it to languish for long.
"Teekay LNG's shares were beaten down for a reason that has nothing to do with the company or its growth prospects. Indeed, its fundamental outlook remains superb. Investors have erroneously assumed that higher natural-gas prices will reduce margins, while a rising greenback will eviscerate returns.
"What those pessimists fail to understand is that this double-whammy doomsday scenario just can't happen. They're either forgetting – or just simply don't know – that TGP utilizes long-term contracts and is largely immune to this.
"TGP expects to boost distributions by an average of 12.5% annually for the next three to five years, which means we have double-digit income growth as a bonus to complement the target price of $40 per share we see ahead.
"Like other master-limited partnerships (MLPs), TGP pays no corporate tax and offers a high yield for nvestors that's presently a juicy 7.40%. Because of this, we urge you to check with your accountants, since an IRA may not be the best place to put your TGP shares.
"As is the case with any major global company, TGP does a lot of business outside the U.S. market – some of it in geopolitically unstable regions – and we'd be remiss if we didn't mention this. TGP is subject to any number of unique operating conditions.
"But that's part of its cachet and actually will contribute to far higher operating margins in the future as additional risk premiums are factored into contract pricing. Buy TeeKay LNG Partners LP."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.











Add your comments