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BMO Capital Markets Unloaded Major Position in EPD

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Mar. 1 2018, Published 4:20 p.m. ET

Recent institutional activity in EPD

MLPs were weak for most of the fourth quarter. The Alerian MLP Index (AMZ), which consists of 50 energy MLPs, lost 2.8% during the fourth quarter despite strong crude oil prices. At the same time, the SPDR S&P 500 ETF (SPY) (SPX-INDEX) rose 6.1%. In this series, we’ll look at the institutional activity in major MLPs during 4Q17 amid the weakness in the MLP space during the fourth quarter.

More specifically, we’ll look at the change in ownership positions in the top 12 MLPs by market capitalization and look at the reason behind the changes. Let’s start with Enterprise Products Partners (EPD).

The number of institutional holders in Enterprise Products Partners increased to 1,069 by the end of the fourth quarter compared to 1,011 in the previous quarter. However, the percentage of shares held by institutional investors fell to 37.1% from 38.6% during the same timeframe.

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BMO Capital Markets unloaded a major position in EPD during the fourth quarter. It sold 10.5 million shares of EPD valued at $278.0 million. On the other hand, UBS Financial Services was the biggest buyer with 9.9 million shares. Among the top ten institutional holders in EPD, 7.3 million positions were added, which indicates a bullish sentiment in EPD.

Why are institutional investors bullish on EPD?

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

  • Strong NGLs (natural gas liquids) throughput volume growth was driven by strong domestic demand and higher exports.
  • The demand outlook for NGLs and LPG looks strong. The partnership is extremely bullish on the expansion of its NGLs pipeline network. Overall, it expects to spend 56% of growth capital on NGLs business over the next two years.
  • Deaccelerating distribution growth is expected to lower the partnership’s dependence on external financing. For more detail read, Enterprise Products Moves toward Self-Funding Capital Projects.
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Top five holders

Harvest Fund Advisors, Tortoise Capital Advisors, Alps Advisors, Kayne Anderson Capital Advisors, and Bank of America Merrill Lynch are among the top five institutional holders in EPD. Harvest Fund Advisors became the largest institutional holder in EPD after Tortoise Capital Advisors unloaded 2.3 million shares during the fourth quarter. Harvest Fund Advisors currently holds 1.9% in the partnership.

Analyst recommendations

96.3% of analysts rate EPD a “buy” as of February 23, 2018, while the remaining 3.7% rate it a “hold.” EPD peers MPLX (MPLX) and Targa Resources (TRGP) have “buy” rating from 78.9% and 61.9% of analysts, while 52.6% rate ONEOK (OKE) as a “hold.” The partnership is currently trading below the low range of analysts’ target price. EPD’s average target price of $31.8 implies ~24% upside potential from the current price levels.

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

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