“Without a doubt, Michael Blum’s team puts together the best, most consistent [master limited partnerships] product on the Street,” one money manager declares. This excellence helps propel the Wells Fargo Securities analysts from third place all the way to the top of this roster, marking the first time since 2011 that Morgan Stanley has not captured the No. 1 position; it tumbles to runner-up. Blum and his seven-strong crew contend that most midstream MLP distributions are secure, even despite the fall in commodities prices and an expected drop in production volumes. “We think psychology will improve once the market sees crude oil prices stabilize at a level that is economic for U.S. producers to drill and grow profitably, which should lead to a clearer trajectory for volumes,” he says. “We view the infrastructure thesis as largely intact, at least for the next three to four years, which should support an attractive industry distribution growth rate.” In light of this outlook, the researchers look favorably on Dallas-based Energy Transfer Equity. The limited partnership company “essentially owns a portfolio of high-quality midstream MLPs that operate in different segments of the energy business, creating a strong diversified portfolio effect,” explains Blum, 40. Most of its underlying MLPs generate fee-based cash flows, he adds, and generate visible growth tied to several organic infrastructure investment projects, such as building new pipelines. A valuation of $40 to $42 is appropriate for the Energy Transfer, they believe, implying a 55.6 to 63.4 percent premium to its price in mid-September. The Wells Fargo squad also likes Houston’s Enterprise Products Partners, “the largest and most diversified pipeline MLP in the sector, with visible multiyear growth and a strong balance sheet,” the 40-year-old team leader explains. Enterprise Products traded at $26.82 in mid-September, and the analysts assign it a price objective of $36 to $39. Blum graduated from the University of Pennsylvania with a B.A. in English literature and a minor in economics. In 2001 he joined First Union Securities, which merged with Wachovia National Bank in September of that year and was acquired by Wells Fargo & Co. in December 2008. Before that he worked as an equity research associate at First Albany Securities, following the alternative energy space.
Image Credit: Spencer Heyfron