With the second quarter winding down, and many on Wall Street starting to prepare for earnings reports in early July, some of the firms we cover are making some additions and deletions to their lists of high conviction ideas for institutional and high net worth clients. While the market appears to have shaken off the big tech sell-off, many are becoming more cautious and looking for better overall value.

In a recent report, the analysts at Baird make some big changes to the firm’s Focus Ideas List. In the firm’s own words, the Focus Ideas List provides high-conviction investment ideas from Baird equity analysts, organized by growth/value and by sector. The value ideas take the longer view, while the growth ideas lead with a clearly identifiable catalyst the analysts see unfolding over the next three to six months.

We looked at the new additions, and found four energy ideas that make good sense for investors now as the sector has lagged dramatically this year.

Energy Transfer Equity

This master limited partnership (MLP) brings the potential for solid growth and income. Energy Transfer Equity LP (NYSE: ETE) owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners and Sunoco. The company also owns Lake Charles LNG. On a consolidated basis, the family of companies owns and operates a diverse portfolio of natural gas, natural gas liquids (NGLs), crude oil and refined products assets, as well as retail and wholesale motor fuel operations and liquefied natural gas (LNG) terminaling.

The Baird analysts noted this in their report:

The underlying Energy Transfer partnerships are levered broadly across key growth areas of the Permian for liquids and Marcellus/Utica natural gas. Following the simplification transaction with Sunoco Logistics Partners, we model a double-digit three-year distribution growth compounded annual growth rate at Energy Transfer Partners, directly benefiting the company via the IDR structure.

Investors are paid a very solid 6.82% distribution. The Baird price objective is $24, and the Wall Street consensus price target is $21.24. The shares closed trading on Wednesday at $16.03.

Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play and it is added to the Focus Ideas List. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top-performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units and a range of advanced coiled tubing units.

Pioneer is not only a huge player in the Permian Basin but also the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain the number one independent player in the Permian, as it is expecting to deliver solid production growth in 2017 and beyond.

The Baird analysts cited infrastructure investment as a huge theme for the company and said this:

The company continues to pursue a comprehensive Midland Basin infrastructure plan to accompany development including water, tank batteries/saltwater disposal (SWD), sand, and gas processing. These investments have helped lower the company’s direct cash operating costs to below $5/bbl with ongoing efficiency gains offering further opportunities for compression.

Pioneer investors are paid a tiny 0.05% dividend. Baird has a $213 price target for the shares and the consensus price figure is set at $228.67. Pioneer closed trading on Wednesday at $164.86.

Tallgrass Energy Partners

This is another top energy MLP added to the portfolio. Tallgrass Energy Partners L.P. (NYSE: TEP) provides crude oil transportation to customers in Wyoming, Colorado and the surrounding regions through Pony Express, which owns the Pony Express System, a crude oil pipeline commencing in Guernsey, Wyoming, and terminating in Cushing, Oklahoma, that includes a lateral in northeast Colorado that commences in Weld County and interconnects with the pipeline just east of Sterling.

In addition, the company provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming, and the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Nebraska.

The analysts said this:

The company has assets in the Rockies, the Midwest, the Northeast, and Texas and should benefit from growing oil and gas production (and the water services that comes along with it) in the DJ and Powder River Basins, the Bakken, the Marcellus and Utica shale plays, as well as the Permian and Eagle Ford plays.

Investors receive an outstanding 7.13% distribution. The whopping $73 Baird price target is well above the consensus that stands at $59.59. The shares closed Wednesday at $46.83.

WPX Energy

This is a smaller capitalization company with solid upside potential, as well as another top Permian Basin play. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas company that engages in the exploitation and development of unconventional properties in the United States. Its principal areas of operation include the Permian Basin, the Williston Basin in North Dakota and the San Juan Basin in New Mexico and Colorado.

WPX is a premier Permian-levered operator with sector leading debt-adjusted cash flow growth supported by strong execution in the core Delaware, all while trading at a Williston Basin valuation primarily due to its relatively high financial leverage.

New top management changes are a positive and the analysts said this:

With the appointment of president and CEO Rick Muncrief, he has streamlined the company’s asset base around oil-focused growth. The firm has monetized legacy domestic gas and international assets following his appointment, bringing an opportunity for expanding cash flow and returns.

Note that while the Baird price objective is $15, the posted consensus target price is $17.90. The shares ended trading on Wednesday at $9.74.

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All these companies are trading well below their 52-week highs, and with all the potential catalysts in front of them, they make solid buys now. Investors should remember that the distributions from the MLPs may contain return of principal.

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