Boardwalk Pipeline is a Medium Term Investment

by James & Miel on September 1, 2006 · 0 comments

So, its my custom, that when I take a large position in a stock, I blog about it. We did the same for Hansens Natural Corp., when we bought shares in that company. Two days ago, I took a position in Boardwalk Pipeline Partners (BWP).

While I’m not as excited about BWP as some issues I’ve bought, I’m optimistic regarding its short/near term performance.

BWP is a limited partnership which engages in the business of transporting and storing natural gas. Its primary income streams are from fees related to these services in gulf, southern and midwestern states. There are some notable disadvantages to owing the stock, including 1) large ownership interest by the their parent company, Loews, 2) low volume of traded shares, 3) government regulation of natural gas pricing and 4) lack of management ownership interest in the company.

That said, I decided to invest for the following reasons. 1) BWP is seems to have been able to both expand their pipeline capacity AND payout their earnings as required by the partnership model, resulting in price growth and a fat dividend. 2) Energy companies are currently in favor both on Wall street and in Washington. 3) There isn’t a lot of competition in pipeline construction due to regulation and 4) the company’s net income has increased by 41% in the last quarter.

Finally, I think this is a medium to short term investment. Morningstar has suggested that BWP’s growth would increase by 10% for three years, but then it would slow to 3%. This jives with my gut impression.

I’ve invested approximately $70,000. I think a 10 to 15% increase in share price in the near term is not unrealistic. This is admittedly a risky move, but there is no gain without risk, and our finances can handle a bit of risk right now.

Best,

James

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