Changes in the energy prices means suppliers are switching back and forth between oil and gas production, choosing to increase production on whichever has the greatest economic benefits.
A drop in oil prices, low natural gas prices, and unlimited speculation about which will rebound makes it difficult to anticipate what energy sources will be the most profitable in the mid and long term. And unfortunately for suppliers, switching production isn't as easy as turning on and off a tap -- they need the infrastructure to accommodate both.
Oil and gas pipelines
With this in mind we made a list of oil & gas pipeline stocks, and then screened for those stocks with encouraging sales trends and higher growth in revenue than inventory year over year, as well as inventory comprising a smaller portion of current assets over the same time period.
To understand why these trends are positive, think why the opposite trends would be negative. If a company sees higher growth in inventory than revenue, it may indicate that the company is having trouble selling its inventory.
In this case, it might imply that they are not switching their oil and gas inventory back and forth to take advantage of the price changes. If the market price of gas exceeds that of oil, then it would be beneficial to transition to gas transportation.
Business section: Investing ideas
Below are the final results from the screen, which have shown positive revenue growth vs. inventory growth.
Do you think these companies will continue to see strong sales and inventory trends? Do they reflect their keeping up with oil and gas prices?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. El Paso
2. Plains All American Pipeline
3. Magellan Midstream Partners
4. Buckeye Partners
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Danny Guttridge does not own any of the shares mentioned above. Data sourced from Google Finance.
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