Plains All American: Pipeline profits

Some companies are shrugging off the market volatility; one of them is Plains All American Pipeline (PAA).

Based in Houston, Plains is a publicly traded limited partnership that transports, stores and markets crude oil and other refined products, including liquefied natural gas.

Its diversified portfolio plays a vital role in the movement of U.S. and Canadian energy supplies.
The partnership transports over 3 million barrels of crude and other refined products a day through more than 16,000 miles of pipelines.

Pipelines still offer by far the cheapest way to ship oil and gas over long distances. Trains and trucks offer some competition, but pipelines are much less labor-intensive and require little maintenance.

Furthermore, there are significant barriers to entry. Acquiring the regulatory approval to build a new pipeline is a long and difficult process. And the significant investment required generally stops new competition in its tracks.

Financial metrics at Plains are top-notch. In the most recent quarter, net income jumped 72% on a 45% increase in sales. I estimate the partnership will earn over $4 a share this year and next.

You�ll notice the shares barely budged in Friday�s downdraft. And the insiders are backing up the truck. In the last few weeks, Director John Raymond purchased more than 15 million shares at an average cost of $59.30.

This is a stock with plenty of upside potential, plus an attractive 6.6% dividend yield. So pick up Plains All American Pipeline at market. And place a protective stop at $50.