Energy stocks are showing real signs 2019 will be the year they break out of a nearly five-year slump.
Both the S&P 500 Energy Index and the Alerian MLP Index posted total returns in the low teens for the first two months of 2019. That’s energy stocks’ best start to a calendar year since 2013, when those two indexes finished up 25 percent and 27.6 percent, respectively, en route to making all-time highs.
Benchmark WTI Cushing crude started 2013 in the low $90s per barrel, briefly broke down to the mid-$80s in April, then hit a high of $110 plus in late August before closing the year right around $100. Henry Hub gas, meanwhile, traded between $4 and $5 per thousand cubic foot for most of the year.
Those prices are a far cry from where we are now. But the trajectory of the commodities themselves has been generally encouraging in recent months. So is the fact that energy midstream master limited partnerships weren’t left out of this uptrend, as they were when oil rallied last year.
We’re equally impressed by how US shale producers seem to sticking to their development plans despite the volatility in energy prices, particularly for dry natural gas. That belies their reputation as a boom and bust sector and is quite bullish for the midstream companies and MLPs that service them as well.
It’s this growing maturity as a business that has us most excited about US energy in early 2019. And we’re convinced most investors aren’t giving these companies nearly enough credit for their transformation, which makes for a great buying opportunity particularly for the stocks in our Actively Managed Portfolio.
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In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on May. 30, 2019
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