With the economy growing, regulations coming down and taxes lower, I’m still finding attractive opportunities out there; one of them is Andeavor Logistics (ANDX), asserts Mark Skousen, editor of High-Income Alert.
Based in San Antonio, Texas, Andeavor is a diversified midstream oil and gas partnership. It owns the Northwest Products Pipeline running from Salt Lake City, Utah, to Spokane, Washington, as well as a jet fuel pipeline to the Salt Lake City International Airport.
It also owns crude oil and refined products terminals and storage facilities in the western, midwestern and southwestern United States.
In addition, Andeavor owns and operates marine terminals in California and Washington, coke handling facilities, a rail-car unloading platform, other oil pipelines and an asphalt trucking operation.
Business is good. The partnership’s annual sales top $3.2 billion. Its operating margin is 23.6%. Management is earning a healthy 18% return on equity. Its earnings are strong too, rising 111% in the most recent quarter.
Midstream stocks have been in an uptrend lately, and Andeavor is no exception. Including dividends, the stock has rallied more than 20% over the last six weeks. Yet one corporate insider, Jeff A. Stevens, is signaling that there is plenty more upside ahead.
Stevens sits on the board of Andeavor (as well as three other companies). He is also the CEO and President of Western Refining Terminals and San Juan Refining. He understands this industry.
According to SEC filings, Stevens purchased 105,074 shares of the partnership in mid-August at a price between $48.21 and $49.46, an investment of more than $5.1 million. (He bought tens of thousands of shares earlier this year, too.)
Stevens knows that Andeavor is likely to earn $2.65 a share this year and at least 30% more next year. He knows that at this growth rate, the shares are cheap at 21 times earnings.
He knows the partnership has increased its dividend every quarter for 29 consecutive quarters -- and that higher net income in the months ahead will substantially increase that dividend. The current yield is already 8.4%.
In short, this is a fast-growing midstream oil and gas company with a cheap valuation, a rising dividend, telltale insider buying and plenty of short-term trading potential.
