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Why Are Institutional Investors Bullish on Andeavor Logistics?

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Recent institutional activity in ANDX

CIBC Atlantic Trust Private Wealth Management and Alps Advisors added a major position in Andeavor Logistics (ANDX) during the recent quarter. They bought 1.44 million and 1.43 million shares, respectively. On the other hand, Bank of America Merrill Lynch and Goldman Sachs & Company were the biggest sellers. They sold 0.68 million shares and 0.65 million shares of ANDX during the fourth quarter, respectively.

Among the top institutional holders, 3.9 million net positions were added during the quarter, which indicates a bullish sentiment in ANDX.

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Why are institutional investors bullish on ANDX?

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

  • significant expansion opportunities including organic expansion and drop-down opportunities from sponsor Andeavor (ANDV)
  • expected distribution growth of 6% and distribution coverage of 1.1x in 2018
  • simplified capital structure through the elimination of IDRs (incentive distribution rights)

Top five holders

Tortoise Capital Advisors, Harvest Fund Advisors, Alps Advisors, Center Coast Capital Advisors, and UBS Financial Services are among the top five institutional holders in ANDX. Tortoise Capital Advisors is the largest institutional holder in the partnership. It currently holds 5.8% in ANDX.

Analyst recommendations

76.5% of analysts rate ANDX a “buy” as of February 23, and the remaining 23.5% rate it a “hold.” ANDX peers Shell Midstream Partners (SHLX) and Phillips 66 Partners (PSXP) have “buy” ratings from 60.0% and 62.5% of analysts surveyed by Reuters. ANDX’s average target price of $55.8 implies ~15% upside potential from the current price levels.

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