ET - Energy Transfer: Where Strong Momentum And Attractive Value Meets

2024-03-06 08:30:00 ET

Summary

• Energy Transfer LP investors have outperformed their energy sector peers amid the energy market volatility over the past year.
• The recent dispute over pipeline practices highlights the moat-worthy nature of pipeline businesses and their ability to protect excess returns.
• Energy Transfer's well diversified portfolio and solid execution track record support its continued outperformance.
• I highlight why its robust forward distribution yield of 8.7% underpins my bullish thesis on Energy Transfer.
• With Energy Transfer still relatively undervalued, investors should continue adding more units and going in more aggressively on steep pullbacks.

Unitholders in midstream infrastructure leader Energy Transfer LP ( ET ) have continued to outperform their energy sector ( XLE ) peers. The thesis in Energy Transfer is straightforward. As an income-focused play, it has delivered admirable operating performance amid last year's energy market volatility. I also urged investors to continue buying into ET at my previous November update, driven by its accretive Crestwood acquisition. Bolstered by ET's primarily fee-based arrangements, Energy Transfer's cash flows exhibit "limited commodity price sensitivity." As a result, it provides the predictability and stability that income investors generally desire, coupled with its highly attractive forward distribution yield of 8.7%....

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