If you want to capture value from gasoline in this part of the value chain, look no further than Kinder Morgan Energy Partners LP (NYSE:KMP). The company and its operating arm Kinder Morgan are the largest independent transporters of finished products in North America. As with NOV, investors who have ridden with Kinder Morgan Energy Partners through thick and thin have seen the company grow more than 1,400% since the 1993 IPO, and it has more than doubled in the past 10 years. The company has also steadily raised its dividend for the past 15 years and sports an impressive 5.8% yield.
3. Help turn water into wine — or, in this case, oil into gasoline
We can’t just pull oil out of the ground and put it in our tanks. There are very elaborate and complicated methods involved in refining oil into the various products we use. Today, thanks to all these new sources of energy and a strengthening pipeline infrastructure, oil refiners have the pick of the litter when it comes to buying crude feedstocks. Many have begun to replace expensive imports such as Brent crude with less expensive options such as oil from the Bakken region of north Dakota or Canadian oil sands, while at the same time gasoline prices have stayed relatively high. HollyFrontier Corp (NYSE:HFC) and Phillips 66 (NYSE:PSX) have consequently their best income margins in several years.
Both of these companies’ share prices have done extraordinarily well as of late. Since Phillips 66’s IPO last year, the company is up 83%, and HollyFrontier is up 56% over the same time frame. While both are great options, they provide different opportunities. Much of Phillips 66’s refining capacity is in the Gulf of Mexico, so the company sees an immense opportunity to refine crude here in the U.S. and export it to premium markets such as South America and Europe. It hopes to be exporting up to 375,000 barrels per day by the end of this quarter. Conversely, HollyFrontier Corp (NYSE:HFC)’s refineries are all smack-dab in the middle of the youngest oil plays in the United States. Since most of these shale plays don’t have adequate pipeline infrastructure away from them, HollyFrontier could be one of the only outlets for these new oil sources, and therefore a cheap crude source.
What a Fool believes
The oil and gas industry is a long and complex web, but the overall product is pretty simple to understand. These three investment ideas are a decent starting point for investors looking to get into the energy space, but your due diligence shouldn’t stop here. Very successful investors will look at the prospects for a company several years from now and plan to hold those companies for the long term. Let us help guide you though the decision-making process by checking out our premium research report on Kinder Morgan. It will give you a much better sense of what’s coming for this energy stalwart. While it may be the largest finished product transporter in North America, there’s still a los coming down the pipe for this company — pun intended.
The article 3 Ways to Get a Refund at the Gas Pump originally appeared on Fool.com.
Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool.The Motley Fool recommends and owns shares of Kinder Morgan and National Oilwell Varco.
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