William Hunt “Bill” Gross is among the most prominent American investors. Best known for co-founding Pacific Investment Management Company (PIMCO) in 1971, Bill Gross became among the top bond investors of all time, and continues to hold that mantle, at least in the minds of many investors. I’m one such investor who continues to follow Mr. Gross’ work (and his portfolio) closely. 

Bill Gross has implemented an investment strategy which involves exploiting market inefficiencies. Of course, there are many economists and market participants who ascribe to the efficient market hypothesis that may disagree that inefficiencies are both abundant and can be readily exploited. But without investors like Bill Gross, we really wouldn’t have this hypothesis to begin with. I guess that’s a whole chicken and egg discussion for another time.

That said, for investors interested to learn which stocks Bill Gross has disclosed ownership of in the past, here are three of the top stocks he’s owned I think are worth considering right now.

Key Points About This Article:

• Bill Gross is widely considered to be one of the greatest bond investors of all time, but he has stepped into the equity markets in the past and provided his commentary on certain stocks.
• Here are three such positions I think long-term investors may want to consider at this current point in the market cycle.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Energy Transfer (ET)

Gross highlights Energy Transfer (NYSE:ET) as a key investment he’s made, and there’s good reason for this. Gross appreciates master limited partnerships (MLPs) for their high dividend yield potential, which makes sense. As a bond investor, Gross focuses disproportionately on dividend yields in the equity markets. Companies like Energy Transfer that pay out a certain percentage of their profits to investors in the form of dividends can be good bets, if one believes their net income will grow over time and they’re able to pass these increased earnings onto investors. 

The current dividend yield for Energy Transfer sits around 7.6%. which is certainly far higher than where most bond yields trade at currently. Additionally, compared to other major pipeline operators which tend to yield around 4%, this relative spread is viewed by many (including Bill Gross) as a relative value opportunity. Indeed, if one believes that over the very long-term dividend yields will likely converge toward an average, that could implicitly mean ET stock has more upside potential than its rivals.

The pipeline giant anticipates it will be able to exceed its growth capital spending target, with overall Capex reaching $3-$3.2 billion over the coming year. This is a result of the company’s unexpected high-return expansion projects, but these projects are ones many investors believe will provide steady long-term cash flows. Current projects, including terminal and pipeline expansions, will drive cash flow growth through 2026. In my view, this is a solid long-term pick, and it’s one I’m considering myself right now for these reasons. 

Enterprise Product Partners (EPD)

Bill Gross continues to hold a favorable view of Enterprise Products Partners (NYSE:EPD), emphasizing this company’s appeal as a master limited partnership (MLP) that offers high yields and tax advantages. In recent commentary, Gross highlighted that MLPs like EPD and Energy Transfer have been undervalued compared to traditional pipeline corporations, despite their attractive yield rates, which are around 7% for these partnerships compared to lower yields from corporate counterparts like Kinder Morgan and Williams Companies.

Enterprise Products Partners provided strong passive income, yielding over 7%, with 26 consecutive years of payout increases driven by rising cash flow. In Q3, the company generated $2 billion in distributable cash flow. That number was up 5% year-over-year, aided by three new natural gas processing plants. These additions led to record processing volumes and enabled EPD to increase its distribution by 5% over the past year. Importantly, the company’s dividend payout ratio is well-covered, with Enterprise Products Partners maintaining a low 56% payout ratio relative to its peers. Using a strategy of reinvesting its cash and paying down debt on its balance sheet while allocating capital for growth investments, this is a stock with an improving balance sheet I can certainly see heading higher over the long-term. 

Western Midstream Partners (WES)

Currently, Gross reportedly holds a stake in Western Midstream (NYSE:WES), though specific details regarding the exact amount of his holdings have not been disclosed in the available sources. His enthusiasm for WES stems from its robust financial performance and attractive dividend yield, which has recently been reported to be around 9.3% following a substantial distribution increase of 52%.

That’s the sort of dividend yield some investors may balk at. That makes sense, since most companies that provide near-double-digit dividend yields typically have distributions that are unsustainable. However, in this case, I think Gross has reason to believe the company can maintain its distribution or even see growth over time.

The company has widely been considered one of the top MLP projects by investors such as Gross for a number of reasons. For one, Western Midstream’s strong fee-based revenue model mitigates exposure to commodity price fluctuations. Additionally, the company’s cash flows are supported by long-term contracts with its clients. This maintains rather steady cash flows through market cycles, and allows the company to deliver larger volumes over time with contracts locked in. 

In my view, this is certainly among the higher-yielding investments I’d consider as part of my portfolio, but I do think the dividend does carry risk (implied by the market). This is one I’m going to have to dive into deeper, but it’s a company that I certainly think warrants more exploration.

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