I've always felt that pipeline energy stocks are undervalued by the market. Recently, after looking at some data, I realized that this sector actually has a natural risk resistance property.

The core logic is quite simple: midstream companies (those operating oil and gas pipelines and storage facilities) have revenue models that are completely different from upstream exploration and production or downstream refining. They lock in income through long-term contracts, which are basically unaffected by oil price fluctuations. That’s why pipeline stocks can provide such stable cash flow.

I’ve noticed that there are a few companies currently standing out in this field. Kinder Morgan operates an 82,000-mile pipeline network in North America, with most of its revenue coming from take-or-pay contracts, which are inherently risk-resistant. Williams Companies is also quite interesting; it focuses on natural gas transportation and processing, with over 33,000 miles of pipelines, meaning it can meet 30% of the natural gas demand in the U.S. There’s also MPLX and Enbridge, the former having stable cash flow from midstream energy and logistics assets, and the latter owning one of the longest crude oil pipeline networks in the world.

Why is it worth paying attention now? Several reasons. First, oil prices are currently above $80 per barrel, which will encourage upstream companies to increase exploration and production investments, thereby boosting demand for pipeline transportation. Second, these companies have very ample project reserves; many billion-dollar projects are about to come online, locking in growth for the next few years. Lastly, their dividend yields are quite attractive, much higher than the average level of the entire energy sector.

From a valuation perspective, it also looks good. Based on EV/EBITDA, the current trading multiple for this industry is 12.71 times, lower than the S&P 500’s 20.12 times, making it relatively cheap. Moreover, over the past year, these stocks have gained 19.8%, although they didn’t keep up with the S&P’s 28.1%, they outperformed the entire energy sector’s 9.8%.

Honestly, pipeline stocks with this stable fee-based business model are indeed a good choice for investors seeking steady cash flow rather than high risk and high return. Especially in the context of increased infrastructure investment and strong energy demand, the prospects for these pipeline stocks remain quite promising.