May 15, 2007: Master Limited Partnership recommendations and a taste of Aero Defense

Pictures: Macquarie's first major acquisition, the Chicago Skyway, and an MLP pipeline terminal.




Well selected Master Limited Partnerships (MLPs) should be included in your portfolio for performance, tax advantaged income and a high yield which likely will protect the floor of the security.

I will be adding a few to my portfolio shortly, in addition to what I already own. Brevity today allows me to list the stock,dividend,target price and estimated total return a few months hence...you do your diligence. Each of these partnerships appear to be very well run and have a stong finances.

Boardwalk Pipeline Partners (BWP)/target $40.00/y5.5%/tr 17.7%
Enbridge Energy Partners (EEP)/t$62.00/y6.1%/tr 8.9%
Enterprise Product Partners (EPO)/t$35.00/y5.8%/tr 12.5%
Kinder Morgan Energy Partners (KMP)/t$58.00/y6.0%/tr 8.3%
Macquarie Infrastructure (MIC)/t$48.00/y5.3%/tr 13.4%
NuStar (NS)/t$75.00/y5.5%/tr 16.8%
TEPPCO (TPP)/t$50.00/y5.9%/tr 14.6%


Aero Defense notes:

Almost all companies are beating street estimates. Small caps are performing better. I admit that I thought the Democrats would have found a way to declare victory and leave Iraq to a large degree by July. I am glad to be wrong on prediction made last fall. The Islamo-fascists need not win in Iraq and spread like a virus on steroids elsewhere- such as in the US. Getting off topic....

Opportunity seems to abound on the commercial aviation side, with strong performances across the board. The best this far has been Boeing (BA). What a marvelous success story at the expense of AirBUST. Goodrich (GR), a large core holding of mine for a few years, has been outstanding with no end in sight. BA and SPR did not raise guidance, but I suspect both are being very conservative with a large upside earnings surprise next quarter. COL also has greater than expected hope for a nice earnings surprise upside. Opportunities for growth in the business jet market are also fueling research and development as an area of focus for both COL and SPR. GR in my view still is a very attractive value. The most expensive in the group, BEAV, has a growth model that fully justifies its price, IMO and is a good momentum play (not my style of investing).

Recent quarterly EPS performance of some Aero Defense stocks that exceeded expectations of the street by 9% or greater:

AH (16.1%)
BA (10.8%)
BEAV (25%)
EDO (20.8)
GR (9.9%)
PCP (14.3%)
RTN (9.9%)
SPR (16.3%)
TDG (23.3%)

That said, I still maintain that a mutual fund or ETF is not the way to play this market. One should take a selective group of positions with individual securities. There are too many land mines out there for "one weapon" stocks.