Editor’s Note: Ideas from HFI Research is a separate service from HFI Research. Ideas that are not covered in the HFI Research portfolio are analyzed and shared here.
These units are too cheap, based on virtually any valuation metric. What they have going against them is their status as an MLP, I think indisputably the most hated asset class in the world. But they have so much going for them that I believe a higher unit price is next to inevitable.
A Trump win is another positive that is working in EPD’s favor. With the favorable regulatory regime the incoming Trump administration will bring, the avenues the company can pursue to achieve high-return growth will only expand from here.
After we published the article, EPD units traded into the mid-$30s in short order:
The units topped out at $34.63 just 15 days after our article and have since retreated to $32.72.
Despite the short-term gains, EPD units remain an attractive buy at their current price. The company’s safe and growing distribution generates a 6.5% yield on its units. The yield is above average for large midstream equities, even though EPD demonstrates some of the most reliably outstanding performance in the sector.
