The old adage about "location, location, location" does not only apply to real estate purchases, says Brian Watson, portfolio manager of the SteelPath MLP Alpha Fund ( MLPAX - Get Report), but to oil pipeline stocks as well.

"You want own a pipeline coming from producing regions going to quickly growing production groups. For example, it's great to have a pipeline flowing towards Florida because we know population growth there is strong," says Watson.

The $300 million fund, which was launched in March 2010, has returned 2% over the past year, better than 54% of its peers in Morningstar's energy category.

One of Watson's largest holdings is Buckeye Partners ( BPL) which bought terminals along the Gulf Coast from BP ( BP) in the wake of the Macondo oil spill. Unlike most other terminals, Buckeye's recent additions are advantageous because they can accept the very largest oil tanker ships.

"These assets were not being utilized as they should have been," says Watson . "We think Buckeye will do a much better job and grow the revenue of those assets significantly."

As for M&A in the pipeline industry, Watson expects it to pick up in the wake of the proposed El Paso ( EPB) and Kinder-Morgan ( KMP) merger, a deal he said makes a lot of sense for both companies.

"El Paso's pipeline assets were amongst the best in the industry and Kinder-Morgan will only increase their value," says Watson. "It adds perfectly to Kinder's current asset profile. It's really were the assets ought to be."

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