Pipeline companies offer the best returns in energy for
investors seeking to cash in on the U.S. shale boom while avoiding
the volatility of a commodity market that's seen natural-gas prices
reach a 10-year-low and crude bounce above US$100 a barrel,
The BLOOMBERG RISKLESS RETURN RANKING shows pipeline companies
over the past five years have provided triple the risk-adjusted
return of companies that produce and refine oil and gas, such as
Exxon Mobil Corp. (
), the next best group. Enbridge (
) Inc. of Canada leads companies on the Bloomberg World Pipelines
Index, which returned 2.9% when adjusted for price swings.
Producers focused on finding and extracting oil and gas gained
Bloomberg said pipelines are the toll roads of the energy
industry, inoculated against price swings thanks to long-term
contracts that lock in fees based on the volume of products they
ship. Demand for shipping is expected to grow as oil and gas
drilling accelerates in U.S. shale fields. With energy's best
returns and lowest risk, pipelines have attracted investors such as
Goldman Sachs Group Inc. (
), which owns 19.1% of Kinder Morgan Inc. (
), the parent of the second-biggest U.S. pipeline company.
"These are companies that have multi-year contracts involving
products that are essential to the functioning of society," said
Randle Smith, a portfolio manager with Duff & Phelps Corp. (
) who helps manage $4.9 billion of global utilities and
infrastructure investments, including more than 2 million Enbridge
shares. "They're not taking on commodity price risks, so it's a
very secure business model."
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