WSGY – Feb 2021

Alright..the first step has been taken. The journey has started. Now for the all-important follow-through.

Continuing with the thesis of building a strong foundation for a healthy long-term portfolio, I am keen to build an element of diversification in the portfolio. We started off with the aim to find a solid long term holding and interestingly ended up , given the extraordinary times we live in, with a solid healthcare company (PFE). Now let’s turn our attention to finding another strong player, but this time in the Energy space.

Energy stocks are notoriously cyclical – meaning they ebb and flow with the overall economic cycles. An interesting article in US News identifies 7 Energy Stocks that could be attractive in 2021:

  • Chevron Corp. (CVX)
  • Suncor Energy (SU)
  • Magellan Midstream Partners (MMP)
  • Enterprise Products Partners (EPD)
  • BP (BP)
  • Cheniere Energy (LNG)
  • EOG Resources (EOG)

Narrowing the list to stocks with a P/E ratio under 20, it becomes a 2-horse race – EPD and MMP.

Lets look at the fundamentals now:

Financial StrengthEPDMMP
P/E Ratio11.511.7
Debt/Equity Ratio119222
Quick Ratio0.80.7
Management EffectivenessEPDMMP
ROA6%10%
ROE15%32%
ROIC7.2%10%
ProfitabilityEPDMMP
Gross Profit Margin19%40%
Operating Margin18%34%
Net Profit Margin14%34%

MMP appears to be better or Profitability as well as Management Effectiveness BUT I am not comfortable with their Long Term Debt being 222% of their equity. So although EPD is less profitable, their Financial Strength is more appealing to me.

VERDICT: EPD by a whisker.


Action: Make the second investment of the portfolio. Buy EPD

Ticker# of SharesValue at Purchase
PFE27 @ $26.60$988
EPD30 @ $23.00$690
Total$1678
Portfolio as on Feb 28th , 2021

Leave a Comment

Your email address will not be published. Required fields are marked *