4 Stock Strategies From Wall Street: Feb. 15

(Story updated with fourth stock strategy idea)
NEW YORK ( TheStreet) -- In today's daily series of investing strategies from Wall Street, analysts talk about the benefits of investing in master limited partnerships and revisiting the home furnishings industry.

1. Tap Into Energy Infrastructure Growth Through MLP's.

"The need for infrastructure construction in North America to match rising natural gas, oil and natural gas liquids volumes is unprecedented," say Deutsche Bank analysts, who estimate that in North America, infrastructure spending will reach $20 billion a year through 2015 for pipelines, gathering, processing, terminals and storage. They also believe the industry's secure and stable streams of income through its fee-based businesses and contracts will continue to be conducive to its ability to raise the debt and equity.

One of the best ways, they say, to tap into this growth in energy infrastructure construction is through master limited partnerships, which combine the tax benefits of a limited partnership with the liquidity of common stock. An MLP isn't a corporation, but its stock trades on major exchanges just like a publicly-traded company.

The Deutsche Bank analysts say that the MLPs they're covering will likely provide total returns of above 10% on an annualized basis for the next several years. Right now, they have an average yield of 6.3%, with 6% to 8% distribution growth as well as 5% to 10% earnings and cash flow growth. Also, they have a yield premium of 391 basis points over the ten-year Treasury. MLPs, which have to derive most of their cash flow from real estate, natural resources and commodities, showed a 13% total return last year, compared with a 2% rise in the S&P 500, according to the Deutsche Bank researchers.

They're particularly enamored with Enterprise Products Partners ( EPD), Energy Transfer Partners ( ETP), Kinder Morgan Energy Partners ( KMP), Rose Rock Midstream ( RRMS) and Western Gas Partners ( WES), predicting 18% total returns in the coming years. Kinder Morgan Energy Partners, Energy Transfer Partners, Rose Rock Midstream and Western Gas Partners' growth will likely come organically, through third-party acquisitions and through drop-down deals in which the general partner sells assets such as pipelines or gas-processing facilities directly to the MLP. These deals are usually highly accretive to cash flow and allow the MLP to boost distribution payouts immediately. The equity research analysts think that Enterprise Products Partners will prove to be the "leader" in organic growth, with its top of line assets.

2. Get in on Multi-Year Furniture Sales Growth

KeyBanc analysts say they think the home furnishings industry is beginning to stage a multi-year recovery as it climbs out of a sales trough that was reached in Nov. 2008 following a 17.9% decline. According to the Census Bureau, annual furniture and home furnishing sales, at $92.4 billion, are still only 8% above that 2009 trough and are now 20% below the prior peak. After having grown in only 18 of the last 22 months and with housing data showing signs of picking up in 2012, KeyBanc researchers believe the home furnishing industry remains well-positioned for multiple years of growth.

"A powerful cyclical recovery is underway," they say.

Of the home furnishing stocks poised for a rebound, the analysts particularly like Cost Plus ( CPWM), thanks to its strong growth strategies. Management plans to get back to peak productivity levels by increasing online marketing, branding partnerships, social media presence and the frequency of shopping among existing customers through the company's World Market Explorer Loyalty Program. Cost Plus is aiming for $100 million in annual online sales.

On January 5, Cost Plus posted a 7.4% increase in November and December comparable store sales, which was tracking ahead of management's guidance of 4% to 6%. The November and December comps were driven by a 3.5% increase in customer traffic and a 3.7% increase in credit card purchases. Cost Plus is poised to post its eighth straight quarter of positive comparable-store sales, according to KeyBanc equity research analysts.

They estimate that the company generated sales per square foot of $230 last year, up from $218 in sales per square foot in the preceding year. While the company has shown significant improvements in square footage sales over the last two years, up from the trough of $201 in 2009, it remains 14% below the peak levels of $267 achieved in 2003.

"Looking at sales from a historic perspective, Cost Plus still has significant recovery potential," KeyBanc analysts say.

3. Invest in Airline Stocks That Share Profits With Their Employees.

As United Continental ( UAL) and Delta Air Lines ( DAL ) hand out $265 million and $264 million in profit-sharing checks to employees this week, Dahlman analysts maintain their buy views on the airline stocks, explaining, "our positive view on these stocks is due, in part, to a stable labor situation."

They add that United is moving closer and closer to meeting the onerous challenge of merging the seniority lists of various labor groups following the United-Continental Airlines merger.

They also maintain their buy recommendation for Southwest Airlines ( LUV ), which they point out has had a successful profit-sharing model for the last four decades. Profit-sharing models, they say, has helped the companies better manage labor costs, as under these models, employee salaries and benefits become variable costs, rather than fixed costs. That means that in the years a company is making less money, the variable salary as a percentage of total costs would also go down. In good times, employees will be rewarded with a cut of the profits, driving their motivation to perform.

The other reasons they like United, Delta and Southwest are their strong advanced bookings through the remainder of the quarter, continued pricing improvement, stable jet fuel prices and improving balance sheets, as they use free cash flow to pay down debt.

UBS analysts say that their airline revenue outlook for the second half of the first quarter is "quite strong." This, as average fare trends in March look to be on par with a "very good" February, which will benefit from an extra day due to the leap year calendar, and as international travel begins to outpace domestic travel.

4. iPhone and Android Popularity Not Going Away Any Time Soon.

Baird's latest consumer survey suggested that Apple's ( AAPL) iPhone and Android devices will continue to dominate smartphone market, with Research In Motion's ( RIMM) BlackBerry device almost off the grid entirely.

There continues to be a strong appetite for smartphone purchases and upgrades generally, among the 875 people surveyed, most of whom were youth in their 20s.

The consumer report from Baird says that of the 26% of respondents who plan to buy a smartphone in the next three months, 45% of Big 4 wireless carrier subscribers plan to purchase an iPhone and 43% plan to buy an Android device. Just 5% of the smartphone buyers plan to purchase a BlackBerry, with Microsoft's WP7 at just 3%.

Among existing BlackBerry users that plan to buy a new smartphone in the next three months, just 24% say they will purchase another BlackBerry. Meanwhile, 43% are planning to purchase an iPhone and 29% an Android.

The survey gauged the level of interest among consumers for potential Amazon ( AMZN) and Facebook smartphones, but responses suggest limited interest, particularly for a Facebook smartphone.

-- Written by Andrea Tse in New York.

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