Here's Why Investors Should Keep an Eye on KMI, EPD, WMB Stocks

Most companies belonging to the energy sector are highly vulnerable to the volatility in oil and natural gas prices. With the fluctuations in oil and gas prices, their cash flow generation varies, making their business model unpredictable.

However, that doesn’t mean that conservative or risk-averse investors should always avoid energy companies. Midstream players like Kinder Morgan, Inc. KMI, Enterprise Products Partners LP EPD and Williams WMB can sail through business uncertainty.

Midstream Business is Relatively Stable

By the very nature of their business model, midstream companies are relatively less vulnerable to volatility in oil and natural gas prices. This is because their oil and gas pipeline transportation assets and storage facilities are being booked by shippers for the long term. Thus, the midstream players like EPD, KMI and WMB can generate stable fee-based revenues for a length of time, making their cash flow generation highly predictable. All three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Stocks to Gain

Enterprise Products has more than 50,000 miles of pipeline network transporting oil, gas, refined products and other commodities. EPD also has a liquid storage facility with a capacity of more than 300,000 barrels. Thus, from the assets the partnership generates stable fees, leading to stable cash flows for unitholders. Enterprise Products also has billions of dollars of growth capital developments under construction that secure future incremental cash flows.

Kinder Morgan is a North American midstream energy major, deriving stable fee-based revenues. Importantly, KMI has a strong growth potential from growing liquefied natural gas (LNG) demand across the globe. This is because Kinder Morgan is responsible for transporting a significant volume of natural gas that is being supplied to the LNG export facilities of the United States.

Williams is also a leading midstream energy player and is well-positioned to capitalize on clean energy demand. This is because, with its pipeline network spanning 33,000 miles, WMB is responsible for the transportation of significant natural gas volumes produced in the United States. Thus, it generates stable cash flows for shareholders.

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This article originally published on Zacks Investment Research (zacks.com).

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