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Institutional Activity in Major MLPs in 2Q17

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Institutional Activity in Major MLPs in 2Q17 PART 1 OF 10

BofA Merrill Lynch Adds Position in Enterprise Products Partners

Recent institutional activity in EPD

In this series, we’ll be looking at the institutional activity of some major MLPs during 2Q17 and their recent analyst recommendations. We’ll try to find out what institutional investors are doing with their positions in MLPs amid the volatility in their stocks over the recent months. Let’s start with Enterprise Products Partners (EPD).

BofA (Bank of America) Merrill Lynch and Principal Global Investors added major positions in EPD, the largest US MLP in terms of market capitalization, during the recent quarter. They increased their positions by 11.4 million and 5.3 million shares, respectively.

BofA Merrill Lynch Adds Position in Enterprise Products Partners

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Overall, EPD saw total buying of 25.1 million shares from institutional investors during the quarter, while 11.1 million shares were sold. Among the top institutional holders, 6.3 million positions were added. That indicates a bullish sentiment in EPD. Harvest Fund Advisors and Alliance Trust were the biggest sellers with 2.6 million and 2.4 million shares sold, respectively.

Why institutional investors are bullish on EPD

Institutional investors’ bullishness toward EPD could be attributed to the following factors:

  • EPD had strong throughout volume growth at its processing plants in the first half of 2017 due to strong production growth. It expects to improve further in the second half of 2017, driven by improvement in drilling activity.
  • EPD had a timely completion of its organic project. It started operations at its new ethylene cracker during the first half of 2017. It expects to add three more ethylene crackers by the end of 2017.
  • EPD had strong growth in NGL (natural gas liquids) and LPG (liquefied petroleum gas) demand.

Top five holders

Tortoise Capital Advisors, Harvest Fund Advisors, Alps Advisors, BofA Merrill Lynch, and Kayne Anderson Capital Advisors are the top five institutional holders in EPD. Tortoise Capital Advisors surpassed Harvest Fund Advisors to become the largest institutional holder in EPD after the recent purchase of 1.6 million shares, while the latter sold 2.6 million shares. Tortoise Capital Advisors currently holds 1.9% in EPD.

Analyst recommendations

About 93.8% of analysts rate EPD a “buy,” while the remaining 6.2% rate it a “hold” as of August 28, 2017. EPD was last upgraded by Morgan Stanley to “overweight,” which is equivalent to a “buy.” Overall, the partnership has seen two rating updates since the beginning of this year, including one upgrade and one new coverage with a “buy” rating. EPD is currently trading below the low range ($30) of analysts’ target price. Its average target price of $32.60 implies a ~27.0% upside potential from its current price levels.

In the next part, we’ll look at the recent institutional activity in Williams Partners (WPZ).

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