NuStar: Earnings, Yield and Insider Buying

05/10/2017 2:50 am EST

Focus: ENERGY

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

At first blush, NuStar Energy (NS) doesn’t seem to have much to get excited about. Sales are up just 1.5%. Earnings are down. And the stock has returned only 2% over the last year, explains Mark Skousen, editor of High-Income Alert.

Yet the people closest to the company are now piling into the stock. Bill Greehey, chairman of the Board of Directors, just bought 324,000 shares, a massive investment of $15 million.

Director Dan Hill, the former president and CEO of Coastal Refining, also bought 5,000 shares, an investment of $232,000. What has compelled these industry insiders to load up on NuStar? Take a closer look…

NuStar is a publicly traded limited partnership with 8,700 miles of pipeline, 79 terminal facilities and four crude oil storage tank facilities. The partnership’s combined system has more than 94 million barrels of storage capacity.

NuStar is also one of the largest asphalt refiners and marketers in the United States and the second-largest independent liquids terminal operator in the nation. It has operations in Canada, Mexico, the Netherlands and the United Kingdom, too.

The plunge in oil prices a year and a half ago created havoc for exploration and production companies. Yet this nation runs on oil and gas -- and the transportation and storage business is not going away. Pipelines and terminals remain the cheapest and most efficient way of moving fossil fuels.

NuStar just reported strong first-quarter results, driven primarily by higher renewal rates at several of its terminals and better throughput volumes thanks to a warmer spring season.

In the second quarter, NuStar will acquire Navigator’s Permian assets, providing a new platform for future growth. That means net income is likely to shoot higher over the next 18 months.

I estimate that NuStar will earn $2.20 a share this year and nearly $3 in 2018. (Some analysts believe those earnings may even reach $3.70.)

In addition to capital gains potential, these shares currently yield 9.3%. No wonder that Greehey and Hill -- two men with access to all sorts of material, non-public information -- are loading up on the stock.  A good trader looks forward not back. And the near-term prospects for this limited partnership are exceptional.

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