Jeffrey Saut is a Managing Director at Raymond James & Associates. His regular market commentary and research is well-regarded and eagerly anticipated. On May 23, he released a new Investment Strategy bulletin, highlighting some of his favorite investments, including Williams Company (NYSE: WMB) and Linn Energy (NASDAQ: LINE):
To begin, even though I continue to believe commodities are likely on “summer vacation” before they resume their secular bull market, I continue to like a number of special situations in the energy space. For example, Williams Company (WMB/$30.76/Outperform) reported a solid 1Q11 quarter boosted by the strong natural gas liquids (NGL) supply/demand fundamentals. Our bullish thesis on Williams is supported by three main points: (1) we believe the company’s E&P assets will garner a higher valuation in the market place as a stand-alone entity when the company splits itself into two parts; (2) we believe the market is undervaluing Williams’ ownership of the Williams Partner GP, and (3) we expect strong growth from the Canadian midstream assets.
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Then there is LINN Energy (LINE/$38.56/Strong Buy), which remains the top pick in the upstream MLP space for our analyst Darren Horowitz. The partnership reported a solid 1Q11, but perhaps more importantly guided to a very strong 2011 with an expected average distribution coverage ratio of 1.4x for the remaining quarters. In 2011, we are forecasting LINE will achieve greater than 35% EBITDA growth and 5% distribution growth. After updating for the acquisition and 1Q11 results, we increased our 2011/ 2012EBITDA forecast by 3%/1%.
Covestor models that hold WMB (as of 5/25) include:
- Large Cap by Gator Capital Management
Covestor models that hold LINE (as of 5/25) include:
- Dividend Growth by James Hofmann
- Growth Plus Income and Pure Growth by BSG&L
- MLP Direct Ownership by Dan Plettner
Sources:
“A Few of My Favorite Things” Jeffrey Saut. Raymond James, 5/23. http://freepdfhosting.com/e69fb60544.pdf
