Spectra Energy Partners, LP (SEP) — This is the investment arm of natural gas and oil pipeline operator Spectra Energy Corp. (SE), which was recommended as the Jan. 20 Trade of the Day and is already up 17%.
SEP stock advanced more than 10% in the past two days following the release of the company’s Q4 and 2015 financial results. Spectra Energy Partners reported distributable cash flow increased 14% in 2015 to $1.2 billion And its distribution coverage ratio, which is the amount of cash distributions made relative to the amount it could potentially pay out, was 1.2, exceeding the forecast of 1.1. This translated to distributions of $2.43 per unit, up 8% from 2014.
CEO Greg Ebel said, “Our 2015 results reinforce the strength of our business — one which has no direct commodity exposure and little volume exposure.”
Credit Suisse rates SEP stock “outperform” with a price target of $61.
Technically, SEP stock is still in a well-defined downtrend with a resistance line at $48 drawn from its December 2014 high near $60. However, we can see three buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), in what appears to be a triple-bottom formation.
In the past two sessions, SEP stock penetrated and held above its 50-day moving average at about $42. And, on Thursday, it penetrated the 200-day moving average at $46.06. If shares can close above the resistance line at $48, they could make a significant move higher.
Buy SEP stock on a pullback to $45 with a trading target of $61 within 10 months for a potential gain of more than 35%, plus dividends. Spectra Energy Partners pays an annual dividend of $2.50 per unit, which receives special tax treatment, for a current yield of 5.5%.
