Pipeline Investors Are Being Rewarded

I spent the last couple of days visiting clients in central Florida, which is why this blog post is a day later than normal. The gradual return of in-person meetings is a welcome reminder that we’re moving on from COVID. Floridians are happy with how their state handled the virus, often noting that business has been more or less as usual for months’ longer than other parts of the country. Bloomberg even declared Florida and its governor Ron DeSantis “the pandemic winner.” At one hotel in Orlando where masks were not required, a guest wearing a mask entered the elevator and apologized for wearing one once he saw me standing there unmasked (I’ve been vaccinated).

It’s still hard to believe that a year ago New Jersey even forbade a solitary walk in the park or woods. The loss of freedom was breathtaking. It prompted my wife and me to travel south at the earliest possible opportunity (see Having a Better Pandemic in Charleston, SC).

Since then NJ adopted a mixture of guidelines and rules which allowed residents to select which ones to follow. For example, the advice to New Jerseyans to avoid non-essential travel was widely ignored based on the crowds I regularly saw at Newark airport during the winter.

Americans are increasingly done worrying about COVID. Abundant fiscal stimulus on top of the vaccine-enabled economic recovery are driving the market higher.

For most equity sectors other than energy, investors often appear more concerned about missing out on a profitable trade than losing money. By contrast, the pipeline sector has not been overly burdened with FOMO buyers for some time – a feature that investors find attractive. It is one of the very few areas of the market that can still be called cheap.

1Q earnings were good, with many positive surprises and guidance revised upwards. The Texas power cut provided windfall gains for Energy Transfer (ET), Kinder Morgan (KMI) and Enterprise Products Partners (EPD). Every company has something to say about the energy transition.

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Disclosure: We are invested in all the components of the American Energy Independence Index via the ETF that ...

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