Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

<div class="content-highlight"><h2>The market is underestimating future cash flows, but news flow may lead to volatile swings before investors are rewarded.</h2></div><hr><p>The last year and a half has mostly been a slog for <a href="https://www.smartkarma.com/entities/25174" target="_blank" data-smartkarma-citation="entities:25174:1">Enbridge Inc (ENB CN)</a> shareholders. The stock declined 16% in 2018, underperforming the market considerably. In 2019, the stock has performed in line with the Canadian market (up 14%) but has lagged the U.S. market and Canadian midstream peer <a href="https://www.smartkarma.com/entities/25199" target="_blank" data-smartkarma-citation="entities:25199:1">TransCanada Corp (TRP CN)</a>. We think uncertainty surrounding long-term mainline utilization and the Line 3 replacement project has made investors tentative. In our view, the market underappreciates the long-term cash flows from these assets.</p><p>We anticipate that all three major pipeline expansion projects—Enbridge's Line 3 replacement, TransCanada's Keystone XL, and the Trans Mountain expansion—will be built by the end of 2022. This naturally creates concerns about the utilization of Enbridge's mainline system. However, we think advancements associated with solvent-assisted technology will lower oil sands break-evens, leading to long-term Canadian production that will surprise to the upside and add 1.3 million barrels of oil per day over the next decade. Investors shouldn't expect mainline underutilization to last long, as we expect it to operate near full capacity as supply ramps up to our forecast levels by 2025. Even when the mainline is operating at a lower capacity, we expect Enbridge to generate enough cash flow to meet our 3% annual dividend growth forecast, aided by cash flows associated with the legacy Spectra Energy assets.</p><p>With major crude pipeline delays the norm, the market has also been cautious about giving Enbridge credit for the Line 3 replacement. However, the project carries minimal federal political risk, and we think that the increased safety standards and immense economic upside make it likely that the Minnesota Court of Appeals will uphold the project's approval. Accordingly, we expect the Line 3 replacement to be placed into service by the end of 2020.</p><p>Wide-moat and 4-star-rated Best Idea Enbridge remains one of our top picks in the energy sector, as we think the market is mistaken about the future of the company's cash flows. We don't expect the market's concerns will be fully addressed for some time, which can lead to volatile swings in the stock. But we advise investors to stay the course while getting paid a handsome 6% (and growing) dividend. In the end, we believe Enbridge's long and winding road will lead to 25% upside.</p>

The market is underestimating future cash flows, but news flow may lead to volatile swings before investors are rewarded.The last year and a half has mostly been a slog for Enbridge Inc (ENB CN) shareholders. The stock declined 16% in 2018, underperforming the market considerably. In 2019, the stock has performed in line with the Canadian market (up 14%) but has lagged the U.S. market and Canadian midstream peer TransCanada Corp (TRP CN). We think uncertainty surrounding long-term mainline utilization and the Line 3 replacement project has made investors tentative. In our view, the market underappreciates the long-term cash flows from these assets.We anticipate that all three major pipeline expansion projects—Enbridge's Line 3 replacement, TransCanada's Keystone XL, and the Trans Mountain expansion—will be built by the end of 2022. This naturally creates concerns about the utilization of Enbridge's mainline system. However, we think advancements associated with solvent-assisted technology will lower oil sands break-evens, leading to long-term Canadian production that will surprise to the upside and add 1.3 million barrels of oil per day over the next decade. Investors shouldn't expect mainline underutilization to last long, as we expect it to operate near full capacity as supply ramps up to our forecast levels by 2025. Even when the mainline is operating at a lower capacity, we expect Enbridge to generate enough cash flow to meet our 3% annual dividend growth forecast, aided by cash flows associated with the legacy Spectra Energy assets.With major crude pipeline delays the norm, the market has also been cautious about giving Enbridge credit for the Line 3 replacement. However, the project carries minimal federal political risk, and we think that the increased safety standards and immense economic upside make it likely that the Minnesota Court of Appeals will uphold the project's approval. Accordingly, we expect the Line 3 replacement to be placed into service by the end of 2020.Wide-moat and 4-star-rated Best Idea Enbridge remains one of our top picks in the energy sector, as we think the market is mistaken about the future of the company's cash flows. We don't expect the market's concerns will be fully addressed for some time, which can lead to volatile swings in the stock. But we advise investors to stay the course while getting paid a handsome 6% (and growing) dividend. In the end, we believe Enbridge's long and winding road will lead to 25% upside.

Enbridge's Long and Winding Road Leads to Significant Upside

Enbridge Inc.

Enbridge's Long and Winding Road Leads to Significant Upside