Monday, April 18, 2011

Buckeye Partners L.P. (NYSE: BPL) Q2 2011 Price Target

Recent price: 62.60$
P/E Ratio: 37.97
3 Months Target Price: 68$

Company Description
According to data provided by Reteurs, Buckeye Partners, L.P. is a master limited partnership. The Company owns and operates independent refined petroleum products pipeline systems in the United States, with approximately 5,400 miles of pipeline and 69 active products terminals that provide aggregate storage capacity of over 53 million barrels. The Company operates in five business segments: Pipeline Operations; Terminalling & Storage; Natural Gas Storage; Energy Services, and Development & Logistics. The Company also operates and maintains approximately 2,600 miles of other pipelines under agreements with oil and gas, petrochemical and chemical companies, and perform certain engineering and construction management services for third parties. The Company also owns and operates a natural gas storage facility in northern California, and is a wholesale distributor of refined petroleum products in the United States in areas also served by its pipelines and terminals.

Confidence Margins
Strong resistance $71.67 (+14%)
Light resistance $68.68 (+10%)
Light support $58.89 (-6%)
Strong support $58.45 (-7%)

Buckeye Partners' shares were hit in the recent days because the company issued about 4 million shares. Investors that were anticipating a great deal of dilution were quick to unload their shares in the company. Current price levels account for a lot more than the real dilution cause by the issuance of new stock, therefore investors taking a position now will benefit from a reversal of the trend.

Entry strategy
For the cautious investor:
Buy the stock for 65$ or less.

For the risk-taking trader:
The August 2011 65$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 110$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 68$, or keep it until 71$ if you are more bullish in your own analysis. The supports are not that far down, so one should keep an eye out on the stocks if it comes to come passed those levels.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 68$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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