Trade of the Day: Are Profits About to Flow From EEP Stock?

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Enbridge Energy Partners, L.P. (EEP) — This limited partnership owns and operates a large, diversified system of crude oil and natural gas pipelines in North America. Its exposure to the Canadian oil sands and Bakken shale region allow it to generate stable results from both heavy and light crude oil transportation trends, and transport petroleum products to the Midwest, Gulf Coast and eastern Canada.

Credit Suisse Equity Research notes quarterly results are “tracking nicely with expectations” and that Q1 EBITDA beat the Street’s estimate. Its analysts are looking for a restructuring to be announced midyear.

Credit Suisse estimates distributions will increase from $2.23 per unit in 2014 to $2.33 in 2015 and $2.46 in 2016. They recently increased their price target for EEP stock by $1 to $48, which implies a 6% yield and total return of more than 35%.

Oil prices rose on Monday with the August contract for light, sweet crude up 0.7% to $60.38 a barrel. The break of the $60 level appears technically important, and most analysts expect prices to average between $63 and $65 a barrel for the remainder of the year. However, a Greek exit from the eurozone could mean lower oil prices due to a stronger U.S. dollar.

While EEP stock does present a certain amount of risk, Monday’s buy signal should not be ignored. The 3.4% pop on the day reflects an increase in buying.

EEP stock broke a downtrend line in April. Resistance is at the 50-day moving average at $37.14 and the 200-day moving average at $37.65. But both are within reach and higher prices are supported by my proprietary indicator, the Collins-Bollinger Reversal (CBR), which recently flashed a new buy signal.

Speculators should buy EEP stock at $37 for a trade to $42, which would result in a 14% return. Long-term investors could see a total return of more than 35%.

EEP Stock Chart
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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/enbridge-energy-partners-l-p-eep-stock-trade-of-the-day/.

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