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Safety remains Cramer’s number one priority in this market and there are few things safer than Enterprise Products Partners [EPD
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(%)
], an unfairly beaten down stock with a high yield.
Sure, EPD might not seem so safe – the stock has performed pretty terribly and is among the most sold of any this quarter. But a lot of that is what Cramer called unnatural selling. EPD’s fundamentals are still intact, and that’s what makes the stock a buy, as far as he is concerned.
As a midstream energy company, EPD deals in natural gas. And we all know how Cramer feels about natural gas. EPD’s problems stemmed from a couple of expansion projects that were held up but should be fully on line this year. The troubles cascaded, though, when people started pulling their money out of hedge funds as financial jitters spread over the last few months. That effect snowballed as fund managers had to sell stocks from their portfolios in order to pay back investors. What did they sell when they absolutely had to get rid of something something? The worst stock in the portfolio, of course, an honor that went to EPD in a lot of cases. Because it was owned on margin by a lot of funds, EPD became one of the hardest hit of this whole process.
But now EPD is fresh off a spate of insider buying. The chairman has bought back over 170,000 shares so far this year and some directors have made smaller buys as well. Never underestimate the importance of insider buying, Cramer reminded on Friday’s show. Insiders only buy when they think their stock is going higher.
This should be a year of improvement for EPD. The expansion projects are going forward, the offshore pipelines should benefit from a new massive hub and there has already been a dramatic increase in pipeline volume. Throw in a beautiful 6.9% dividend yield and all that unnatural selling seems like a thing of the past.
The yield is irresistible and the stock is simply way too cheap, Cramer said. Don’t worry about the selling – this is the year of natural gas and EPD is right in the sweet spot.
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