Jay D. Hatfield, Founder, CEO and Portfolio Manager, Infrastructure Capital Advisors
Jay D. Hatfield is the Founder, Chief Executive Officer and Portfolio Manager of Infrastructure Capital Advisors, and has almost three decades of experience in the securities and investment industries.
At ICA, he is the Portfolio Manager of several ETFs, including InfraCap MLP ETF (NYSE:AMZA), and a series of hedge funds.
A focus on companies that own real or hard assets, like energy infrastructure and real estate, runs through Mr. Hatfield’s career.
Prior to forming ICA, he partnered with senior energy industry executives to acquire several midstream MLPs, which merged to form a company now known as NGL Energy Partners, LP (NYSE:NGL). He is a general partner of the publicly traded company.
In the years prior to forming NGL, Mr. Hatfield was a Portfolio Manager at SAC Capital (now Point72 Asset Management).
He joined SAC from Zimmer Lucas Partners, and earlier in his career he was head of an investment banking unit at CIBC/Oppenheimer and a Principal in an investment banking unit at Morgan Stanley & Co.
He began his career as a CPA at Ernst & Young, and holds an MBA from the Wharton School at the University of Pennsylvania and a B.S. from the University of California at Davis.
Mr. Hatfield is the Founder of Tutoring America, a non-profit organization dedicated to providing low-income students with supplemental tutoring services and technology to accelerate learning in both math and English language arts.
He frequently appears on or is quoted in Barron’s, The Wall Street Journal, Yahoo Finance, TD Ameritrade Network, and Bloomberg Radio/TV.
In this 2,192 word interview, Jay Hatfield details the methodology that leads him to recommend Energy Transfer (NYSE: ET), Enterprise Products (NYSE: EPD), and MPLX (NYSE: MPLX).
“We believe in very detailed fundamental research — we do bottom-up models of every company, we call the company, review our models, we have an outside service that gives us data down to the well level, of course we look at commodities — and then develop differentiated views from consensus, and then overweight companies where we’re more optimistic about earnings and underweight companies where we’re less optimistic.
And we look at relative valuation models to determine which companies are the most attractive and which companies are least attractive, and then we normally underweight the least attractive companies and overweight the most attractive companies.
It’s worth mentioning, we also do write selective covered calls where we think it’s appropriate — normally where we’re overweight — and we believe that does add value over long periods of time as well.”
Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) move to the top of the list using these methods.
“In our view, since energy is risky enough on its own in normal markets — although it actually has been somewhat defensive over the last couple of years, but it often can get volatile — we focus on the companies with a national footprint, investment-grade rating, fully diversified between natural gas, oil, refined products.
Those would be the companies that are more or less household names, at least if people follow pipelines, like Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX).
Those companies have diversified, national operations and normally good coverage of dividends, good dividend growth track records. We’re looking for the highest quality, because really, most of our clients are looking for stable to growing dividend income, so they want lower risk, national operations, diversified, investment-grade companies to anchor the portfolio.”
The long term view of the current energy production situation lends itself to support for Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) as good long term portfolio investments.
“We had felt this before, but what we learned from Europe’s attempts at an energy transition is that if it’s done too rapidly, you’re going to have massive price hikes.
People forget that, actually, natural gas spiked before the Ukraine war, and that was a function of shutting down too much nuclear and too much natural gas production, not building any gas-fired units, and trying to rely just on wind, which is not a stable resource.
What a lot of people and investors forget is the first hydrocarbon that needs to be completely eliminated is coal. Coal still represents about 44% of global carbon emissions, and that’s why natural gas exports are so critical.
What should happen — it is not happening right now — is all the coal gets shut down first, and then we produce way more natural gas.
It’s a little bit counterintuitive.
Many environmentalists in the U.S. are trying to fight to close down all hydrocarbon production very rapidly, but we’ve already seen what happens when you attempt that in Europe, where you have a high probability of shortages.
The only scenario where we would have a rapid banning or transition away from all hydrocarbons is if we had a huge expansion of nuclear, but it’s almost impossible to site anything in the United States, much less a nuclear power plant, and they’re phasing out nuclear in most of Europe, particularly in Germany.
So that would be the scenario where you could get rid of all hydrocarbons — where you have a huge expansion in nuclear — but a lot of environmentalists are opposed to it, including me.
I think that the radiation danger of that exceeds the benefits.
So we see more of a 50- to 100-year transition, versus the 10 or 20 that a lot of environmentalists were proposing two, three years ago.”
This all leads to a firm “buy” vote of confidence from Mr. Hatfield for Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX).
“We think there’s an opportunity to be a contrarian and buy MLPs at what we think is a discounted price relative to fair value, get high yields that are averaging about 8% right now, get dividend growth, potential low-teens total returns, just because of that overhang which caused a lot of investors to just abandon the sector.”
Get the complete picture on the portfolio picks Energy Transfer (NYSE:ET), Enterprise Products (NYSE:EPD), MPLX (NYSE:MPLX) by reading the entire 2,192 word interview with Jay Hatfield, energy infrastructure expert, founder, CEO and portfolio manager of Infrastructure Capital Advisors, exclusively in the Wall Street Transcript.
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