Madness thrives in the financial press.
You likely noticed it last week in the run-up to the Alibaba (NYSE: BABA) IPO.
As press wizards predicted either Alibaba’s doom and gloom or a new wave of wealth, readers gobbled up the headlines. And while they did, the big business financial media collected ad revenue for every click, all to pad the bottom line.
That’s just one example of the hot stock-driven click-bait you’ll find on a daily basis.
Oddly enough, one of the best stories I saw all month came from a very unlikely source: a CEO.
Elon Musk, CEO of Tesla Motors, said the following:
I do think people sometimes get carried away with our stock. I think our stock price is kind of high right now to be totally honest. If you care about the long-term Tesla, I think the stock is a good price. If you look at the short term, it is less clear.
When the head of a company is saying its stock is overvalued, you know the market has gone crazy.
Even if you think electric cars are the future of ground transportation, you have to agree with Musk. His company has over $2 billion in debt but costs $258 per common share.
There may be potential for the long term, but right now, the stock is a haven for emotional speculators.
Present Value
Unlike the mainstream press, your editor doesn’t concern himself with emotions or potential value. I look for present value.
My goal is to scour the earth for companies that are safe and reliable sources of growth.
And right now, with the major indices trading at all-time highs and shady e-commerce companies raking in billions on offerings, we’ll let the pundits collect their ad revenue while we strut toward easy street.
Our goal is to see real value, not just potential. Of course, when the markets go as high as they currently are, doing so becomes a chore.
But if you do your due diligence and look to the right sectors of the economy for low-risk companies with solid management and great track records, you can make real money in this mad, mad market.
And the lowest-risk companies in the energy sector are on the verge of a breakthrough that could make them more valuable than ever…
The Midstream Money Machine
Over the summer, you probably caught wind of the news that the U.S. Commerce Department enabled companies to export a lighter form of crude oil known as condensate.
The Eagle Ford is a hot spot for condensate production, and companies operating there rose on the news.
Since then, the exports have been steady from South Texas to Korea, Japan, and Europe.
But here’s the kicker: When the news hit, investors flocked to just two companies…
Pioneer Natural Resources and Enterprise Product Partners were the only two firms granted approval for condensate exports, and once this was reported, the herd ran away with it and sent share prices higher.
But I don’t see these two as the best places for you to capitalize on condensate exports.
The real devil is in the details… and the details, in this case, are midstream companies.
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The Buckeye Buy
The truly valuable news this week was largely overlooked by our peers in the markets: New midstream developments are forcing the Oklahoma crude oil hub in Cushing to expand.
Tank farms there are now capable of holding 70 million barrels of crude…
And one of the many deals that helped this expansion was a quiet — albeit valuable — maneuver by Buckeye Partners L.P. (NYSE: BPL).
The midstream firm agreed to an $860 million deal for a stake in the condensate export game. U.S. condensate production grew 54% between 2009 and 2012 and is still on the uptrend.
And Buckeye’s new deal gives it an 80% stake in Trafigura AG’s condensate gathering facilities and processing plants. This means if you buy Buckeye, you’ll see income from the source.
Rather than flocking to Pioneer or Enterprise Products like mainstream investors, you’ll be quietly cashing in on the spigot of condensate itself.
Buckeye has done well over the last year, but beyond that, management has over 20 years of experience and a great track record of increasing shareholder value.
Plus, the steadily growing 5.5% yield is a great way to safely pad your portfolio without speculating on the hot stock of the moment.
If you’re interested in your share of condensate export profits, look no further than Buckeye in the Eagle Ford.
Of course, if you’re looking for a little more short-term value from this phenomenon, I don’t blame you…
My colleague Keith Kohl and his readers have been raking in gain after gain inside the Eagle Ford. And it’s not too late for you to do the same.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
