5 MLPs To Buy And 4 To Sell

In a new report, Morgan Stanley analyst Tom Abrams expands the company’s MLP coverage by initiating ratings on a number of midstream names. According to Abrams, the firm is beginning to see improvement in the MLP multiple compression that has weighed on top names throughout the oil downturn.
 

Although Abrams believes there is still a significant chance MLP prices could fall to new lows, he notes that progress has been made in approaching a bottom.
 

“That said, many midstream firms continue to have the negatives of funding issues, overly levered balance sheets, and headwinds of declining EBITDA into 2017 and 2018, particularly in a lower-for-longer environment,” he explains.
 

Related Link: U.S. Inflation Is Pricing In A 'Sharp' CPI Drop Or Further Oil Crash, Goldman Warns
 

Abrams says that investors should continue to avoid MLPs with overly-levered balance sheets, funding issues, weak cash flows and high distribution risk.

Morgan Stanley has initiated Overweight ratings on the following five MLPs:
Buckeye Partners L.P. BPL
Columbia Pipeline Partners LP CPPL
Dominion Midstream Partners LP DM
Phillips 66 Partners LP PSXP
Valero Energy Partners LP VLP

In addition, the firm now has Underweight ratings on the following four names:
Enable Midstream Partners LP ENBL
Enbridge Energy Partners, L.P. EEP
Enbridge Energy Management, L.L.C. EEQ
Midcoast Energy Partners LP MEP

Disclosure: the author holds no position in the stocks mentioned.