Portfolio Action Summary

• Spectra Energy (NYSE: SE) added to Conservative Portfolio. Buy below $42
• Delek Logistics (NYSE: DKL) added to Growth Portfolio. Buy below $42
• Atlas Resource Partners (NYSE: ARP) downgraded to Sell in Aggressive Portfolio
• Teekay LNG Partners (NYSE: TGP) downgraded to Sell in Growth Portfolio
• Vanguard Natural Resources (NASDAQ: VNR) downgraded to Sell in Aggressive Portfolio
• Boardwalk Pipeline Partners (NYSE: BWP) upgraded to Buy below $19 in Aggressive Portfolio
• Buckeye Partners (NYSE: BPL) shifted to Aggressive Portfolio and downgraded to Hold
• DCP Midstream Partners (NYSE: DPM) downgraded to Hold in Growth Portfolio
• Genesis Energy (NYSEL GEL) shifted to Growth Portfolio, remains a Hold

Alliance Holdings GP (NASDAQ: AHGP) — The general partner of a coal mining MLP continues to escape the punishment meted out to most coal stocks, perhaps because it is a low-cost producer supplying mostly Midwestern utilities, with no exposure to the drop in metallurgical coal demand. Coal is not at all tied to the price of crude; the industry is more interested in the price of natural gas with which it competes for utility customers. Earnings are due Oct. 27 after the market close. At its Oct. 14 low the unit price was down 20% from its Sept. 11 record high. It has since bounced 12% above that low. Buy AHGP below $77.

AmeriGas Partners (NYSE: APU) — The propane distributor has earned a gradually expanding margin during propane booms and propane busts, so recent weakness in propane prices, which are indirectly tied to crude, should not prove much of an obstacle. The unit price has performed admirably during this correction, holding its ground in September and then dropping less than 7% between Oct. 6 and Oct. 14. It has since recouped much of that decline. Earnings are tentatively due on Nov. 18. The #8 Best Buy, APU should be accumulated below $51.  

Atlas Resource Partners (NYSE: ARP) — The upstream MLP derived approximately 16% of its revenue from crude and another 9% from natural gas liquids in the most recent quarter, and had hedged 85% of its recent crude output at more than $90 per barrel through the end of 2015. But that hasn’t stopped the unit price from dropping from $19.46 at the end of September to an intraday low of 14.30 on Oct. 10 and $14.35 on Oct. 15. The increased risk to the distributions from weak energy prices compounds the likely drag from high incentive distribution rights splits. It hasn’t helped that ARP has been on a crude production acquisition spree shortly before the bottom fell out of the crude market. At this point, the high dividend yield is more of a warning sign than an opportunity. We’re downgrading ARP to a Sell.

Boardwalk Pipeline Partners (NYSE: BWP) — The partnership is not involved with crude, deriving the bulk of its revenue from natural gas transportation and storage. Nevertheless, the unit price dropped from nearly $20 at the end of August to less than $15 at the lows of Oct. 15. The gas shipper has used the financial breathing room it bought with February’s 80% distribution cut to continue to invest in its Gulf Coast assets. Last month, Boardwalk said it would acquire the Evangeline ethylene pipeline system from Chevron (NYSE: CVX) for $295 million, deepening its involvement in supplying petrochemical plants in *Louisiana. Separately, the partnership announced 20-year contracts to ship 1.4 billion cubic feet of natural gas a day to the Freeport LNG terminal under development in Freeport, Texas, starting in 2018. Earnings are due Nov. 3 before the market open. We’re upgrading BWP to a Buy below $19.

Buckeye Partners (NYSE: BPL) — The partnership primarily ships and stored refined fuels under long-term contracts, though it has noticeably stepped up investment in crude terminal operations over the past year. It has done so mostly under the protection of fixed long-term contracts with minimum commitments, and is unlikely to be directly affected by the recent discounting of crude. However, an extended crude slump would pose a serious risk if it were to slow US shale development, especially in light of Buckeye’s recent purchase of Texas facilities for exporting Eagle Ford condensate and crude. The recent acquisition spree has also materially increased operational risks, as shown by the large trading loss the partnership suffered last quarter as it tried to take advantage of its increased storage capacity to speculate on the price of gasoline. The unit price was down as much as 20% for October at the Oct. 14 lows before bouncing back 8% over the next two days. Earnings are tentative due Oct. 31. Given its extensive leverage and subpar distribution coverage we’re shifting BPL from the Conservative to the Aggressive portfolio and downgrading it to a Hold.

CVR Refining (NYSE: CVRR) — Lower crude prices figure to benefit this variable distribution refining MLP over the long haul, though crack spreads — refining profit margins — don’t necessarily expand as the price of oil falls.  Earnings are due Oct. 30 before the market open. The unit price has traded in the range for the last month, dropped nearly 8% over a recent four-day stretch as the stock market plunged, but then quickly recovered. With minimal debt and two sophisticated refineries ideally located for sourcing the cheapest domestic crude, CVRR remains a Buy below $26.

DCP Midstream Partners (NYSE: DPM) — As one of the largest gas gatherers and processors, the partnership is not directly dependent on crude prices. However, should a protracted slump significantly slow shale development, DPM would be likely to see reduced growth in gas output from these basins. Some 45% of the revenue has commodity exposure, and 80% of that exposure, primarily in natural gas liquids, was recently hedged for 2015, while only 20% was hedged for 2016. In terms of its unit price, DPM has been one of the stronger MLP performers of late, retreating 7% since the end of August. . Earnings are due Nov. 5 after the market close. DPM is downgraded to a Hold.  

Energy Transfer Equity (NYSE: ETE) — The sponsor of what is now the largest family of affiliated MLPs has some oil exposure after recently approving the construction of a new crude pipeline from the Bakken, where further shale development is likely to slow should oil prices stay weak. Its Regency Energy Partners (NYSE: RGP) affiliate is exposed to the degree that crude drives discounting of natural gas liquids that it sells from its processing operations, although that exposure is mostly hedged in futures markets. On the other hand, ETE’s Sunoco Logistics (NYSE: SXL) affiliate, which derives most of its profit from the gathering and trading of crude, is not dependent on the absolute price level but rather makes more money when crude markets are more volatile, as they’ve certainly been of late. And the recent acquisition of Susser Holdings by Energy Transfer Partners (NYSE: ETP) has further diluted commodity price risk for the Energy Transfer Family. ETE’s unit price held near record highs until Oct. 1, then slid 23% through Oct. 13. It has since regained more than half of that loss. Earnings are tentatively due after the market close on Nov. 4.  The buy limit on #4 Best Buy ETE is $66.

Energy Transfer Partners (NYSE: ETP) — The bulk of the partnership’s exposure to crude is via its interest in Sunoco Logistics (NYSE: SXL), where recent volatility could actually boost trading profits. The partnership’s gas transport and processing profits are also likely to prove resilient, while its recently enlarged filling stations segment should benefit as lower pump prices drive more business. ETP ran up sharply during September and the first week October, outperforming almost every MLP over that stretch to reach a record high near $66 on Oct. 7. It then plunged to $53 at the Oct. 14 low and has now recovered to $62. At this price, the current 6.1% yield and numerous growth levers give ETP plenty of upside along with decent downside protection. Results are due Nov. 4. ETP is our #1 Best Buy below $70.

Enterprise Products Partners (NYSE: EPD) — One of the largest and most conservatively managed MLPs, Enterprise conceded little ground from the vicinity of record highs until October. At that point, its acquisition of longtime business partner Oiltanking and the affiliated Oiltanking Partners (NYSE: OILT) MLP for $6 billion in cash, equity and assumed debt reminded traders that the leading natural gas processor and natural gas liquids exporter has also taken the lead in the development of oil condensate exports. The unit price, which had hung around $40 throughout September, fell below $32 at the Oct. 14 lows, but has since retraced much of that decline. Enterprise has noted that its NGL shipping and processing margins are not dependent on crude prices, and it attempts to hedge the entirety of its commodity exposure. However, a significant drop in the price of crude relative to that of natural gas could at the very least slow the recent gains in exports of NGLs. Which is why EPD’s relatively low debt leverage and generous distribution coverage loom so big right now. The #2 Best Buy, EPD should be purchased below $42.50.  

EQT Midstream Partners (NYSE: EQM) — The Marcellus gas transporter and gatherer has no exposure to crude, yet its modest 2.7% yield and aggressive growth profile didn’t stand in the way of a 23% decline between the end of August and Oct. 13. The unit price has since rebounded 13% off that low, reclaiming its 200-day moving average. Earnings are due before the market open on Oct. 23. Our June recommendation that investors who bought on our advice at $47 10 months earlier sell half their stake at twice the purchase price has worked out so far. At this point, EQM remains a Hold.

GasLog Partners (NYSE: GLOP) — The owner of LNG ships is indirectly exposed to crude only insofar as a long-term slump might diminish demand for LNG cargos. At this point, that outcome is far from certain and GLOP’s charter revenue backlog looks solid. Yet the units have traded as if a major business downturn is assured. We think it’s not, and the current 6.5% forward yield suggests further recovery is likely. Note that many data providers understate the yield based on the partial distribution GLOP made for the quarter in which it went public. The partnership raised $140 million in a well-timed late September equity offering that will help it buy two more carriers from sponsor GasLog (NYSE: GLOG).  Earnings are due Oct. 30 before the market open. Buy GLOP below $30.

Genesis Energy (NYSE: GEL) — The crude logistics player and pipeline operator notes that it has modest direct exposure to oil prices, with its onshore and offshore Gulf Coast pipelines producing mostly tariff-based fee income and its gathering contracts containing clauses that protect its bottom line from prolonged price moves. The partnership was also short 613,000 barrels of crude as of June 30 at an average price of more than $104 a barrel. Still, its long-term outlook is intricately tied to the domestic crude production volumes, and the balance sheet does not leave room to add much debt. Based on these factors, we’re moving GEL from the Conservative to the Growth portfolio and maintaining our Hold rating.

Targa Resources (NYSE: TRGP) — The timing was the most unfortunate thing about the gas processing leader’s $1.9 billion acquisition of Atlas Energy (NYSE: ATLS), announced on Oct. 13 just as MLP prices were plunging to multi-month lows. In conjunction with that deal, Targa’s operating MLP affiliate, Targa Resources Partners (NYSE: NGLS), will be paying $5.8 billion in cash, debt and (mostly) equity to acquire Atlas Pipeline Partners (NYSE: APL). On the conference call that followed the announcement there was much talk about the excellent strategic fit between the parties’ overlapping midstream assets in the mid-Continent region. But the purchase of the long struggling Atlas system was mostly about the increased tax depreciation benefits it brings to Targa, which is what will allow both TRGP and NGLS to significantly exceed previous projections for distribution growth. TRGP is now promising to increase its dividend 35% next year, up from 25%+ in 2014. NGLS is aiming for a distribution hike of 11% to 13% next year, up from 7% to 9% in 2014. It’s not enough for us to call these names buys again after recommending the skimming of fast gains back in June. But it will sure leave both securities comfortable holds. Earnings are set for Nov. 4 before the market open. Hold TRGP and NGLS.

Teekay LNG Partners (NYSE: TGP) — The LNG shipper and longtime portfolio staple has now recovered roughly a third of the 19% drop it endured between Sept. 30 and Oct. 13. But its healthy charter book and 7% yield no longer provide sufficient compensation for very high debt leverage given the ongoing volatility in crude prices, which has at least the potential to undermine LNG demand. Some readers would face a high tax bill selling at this point, given that TGP has more than doubled in price since it was recommended. (And of course it has provided a total return of 212% in that time.) Those facing a significant tax consequence can hold on, as there is no sign the distribution is in any immediate danger. But we believe there are better, less leveraged LNG plays out there, and for that reason we’ll be removing Teekay LNG from our portfolio. Sell TGP.   

Vanguard Natural Resources (NASDAQ: VNR) — Vanguard’s problems are much the same as those of many other upstream MLPs: it’s reliance on high-yielding debt to pay high dividends is a particular danger during a potentially prolonged period of weak energy prices. And its distribution coverage was lacking recently even when crude and natural gas prices were higher than they are now. Another caution about possible unwelcome tax consequences is in order here, though these should be modest for most since Vanguard has only returned 23% in nearly three years. Sell VNR.