Natural gas – and the rapidly-developing sector of shale gas – will likely play a larger role in the U.S.'s future energy needs, which is why I'm reiterating my buy rating for Enterprise Products Partners (EPD), first recommended on April 29, 2009 at a price of $24.24. Enterprise Products Partners is an integrated provider of natural gas pipeline and processing services and natural gas liquids, fractionation, storage, transportation and terminal services. EPD also is a major developer of midstream infrastructure in the deepwater of the Gulf of Mexico.
Look for increasing pipeline volumes and cash flow for several years ahead with EPD. The likely star? The Independence Hub/Pipeline, which should add $1.50-$1.75 in annual earnings starting this year. EPD's strong asset base, size, and ample cash add to the positive story. The First Call FY2009/FY2010 EPS estimates for EPD are $1.59 to $1.84. That FY2010 EPS estimate will likely prove to be low.
Technically, Enterprise's stock chart is in an uptrend, with quick recoveries following dips to the 50-day moving average, which indicates that institutional investors are taking advantage of the pull-backs to establish/add to positions.
Stock Analysis: Enterprise Products Partners is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in EPD now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your EPD position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $12.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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