Pipelines Below the Radar

Remember when we were all frantic about the state of our economy in 2008? Like most folks with life savings invested in the stock market, I was hunting for stocks that were safe and recession-proof.

Those were the days when I swooned over Motley Fool’s Hidden Gems – their small cap stock portfolio, in particular the innovative alternative energy stocks like Solazyme and Enernoc. Their ideas and efforts were mind-blowing. Sadly their balance sheets were not. I got a kick out of adding to their working capital, and kept my investments tiny.

As the recession progressed, I looked to Motley Fool for minimally profitable stocks that would also produce sizable dividends. They recommended Energy Transfer Partners (ETP) which had an 8.5% eye-catching dividend. Its business profile said it was involved in the transfer of all kinds of energy and mentioned pipelines. Since love can be blind in the stock market, my MF crush led me to believe ETP must at least dabble in green energy.

Joe Lombardi (my advisor) and Motley Fool hardly ever recommended the same stock. So when Joe also recommended ETP we added it to our Ameriprise portfolio, and a few weeks later my stock club bought it too. It remained in our stock club portfolio for about 3 years. The dividends were good but the stock was, as one member said, “BOR-ING.” The stock remained in our Ameriprise portfolio – “boring” dividends and profits were just fine there.

Around 2014 the Keystone Pipeline began to get a lot of media attention, and it occurred to me that ETP might be up to no good. Memo to Self: Bring this up with Joe – probably sell it. Like other memos to self (make dental appointment, bring batteries and paint to Pomona), I misplaced the memo. One day when the Ameriprise statement came, I skimmed the long detailed pages to see if we still owned ETP; after a quick look under the equity listings, no ETP. Oh great, I must have told Joe to sell it.

When I began my audit of our Ameriprise portfolio this Spring, I went line by line looking for funds and stocks needing further investigation. The evils of pipelines and ETP’s misdeeds were well publicized by then. What a company – Donald Trump had a sizable holding;  they bamboozled community after community, they had spill after spill. Then, I found it hiding in our portfolio! No Way. How humiliating!

How could I have missed it? It wasn’t where I was looking but in an esoteric section just beyond the stock listings, REITS and other equity products. Why? It is structured as a master limited partnership giving it the tax benefits of a limited partnership and the liquidity of a publicly traded security.

Nevertheless it was a screw-up – letting ETP use my money for ill without checking into what they were up to; then, my sloppy follow-up, to put it mildly. I couldn’t wait to dump ETP and use that money to buy a pristine and profitable wind stock.

So, to state the obvious:

Add pipeline companies like ETP to your divestment audit: Kinder Morgan, Enbridge, TransCanada. Are any hiding in your portfolio? If so, consider selling them off and reinvesting in a cool alternative energy stock. Climate Smart Investments offers good suggestions and great explanations of the broader issues. And, always keep your divestment memos to self close at hand.

(Shades of Green advocates divestment of fossil fuels, but makes no specific recommendations concerning re-investments.)