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Institutional Activity in Major MLPs in 2Q17

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Part 7
Institutional Activity in Major MLPs in 2Q17 PART 7 OF 10

Morgan Stanley Added Major Position in MPLX in 2Q17

Recent institutional activity in MPLX

Morgan Stanley Investment Management and Goldman Sachs added major positions in MPLX (MPLX) during the recent quarter. They bought 5.7 million and 2.5 million shares, respectively.

Morgan Stanley Added Major Position in MPLX in 2Q17

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MPLX, the MLP owned by Marathon Petroleum (MPC), saw total buying of 11.5 million shares from institutional investors during the quarter, while 7.1 million shares were sold. Among the top institutional holders, 7.6 million positions were added. That indicates a bullish sentiment in MPLX. Kayne Anderson Capital Advisors and Natixis Asset Management were the biggest sellers with 1.8 million and 1.7 million shares sold, respectively.

Why are institutional investors bullish on MPLX?

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

  • strong earnings growth
  • strong presence in the prolific Marcellus and Utica regions
  • diversified business
  • strong dropdown opportunities from sponsor Marathon Petroleum (MPC) – The partnership is expecting several dropdowns from MPC during the third quarter. According to the 2Q17 earnings release, “These assets are projected to generate approximately $135 million of annual adjusted earnings before interest, taxes, depreciation and amortization.”

Top five holders

Alps Advisors, Tortoise Capital Advisors, Harvest Fund Advisors, Morgan Stanley Investment Management, and OFI SteelPath are the top five institutional holders in MPLX. Alps Advisors continues to be the top institutional holder in the partnership. It currently holds 6.8% in MPLX.

Analyst recommendations

About 89.5% of analysts rate MPLX a “buy,” and the remaining 10.5% rate it a “hold” as of August 28, 2017. Guggenheim initiated coverage on MPLX last month with a “buy” rating. Overall, MPLX saw four rating updates in 2017, including three upgrades and one new coverage. MPLX’s peers Energy Transfer Partners (ETP) and Targa Resources (TRGP) have “buy” ratings from 81.8% and 87.5% of analysts, respectively, surveyed by Reuters. MPLX is currently trading below the low range ($38) of analysts’ target price. Its average target price of $42.80 implies a ~27.0% return from its current price levels.

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