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Focus on MLPs: Still a Table Pounding Buy for the Patient

By Elliott H. Gue on Dec. 2, 2018

Six months ago, we returned from the 2018 MLP & Energy Infrastructure Conference with a full head of steam. Our most important takeaway: MLPs’ fundamentals and technicals were improving at the same time investor sentiment appeared to have sunk to a new low.

Our conclusion was we had a table pounding buying opportunity on our hands for the best MLPs. We highlighted the specifics in our June 15 roundtable “Picks, Pans and Takeways.”

Since then, MLPs staged a mild summer rally, only to give it all up and more in the autumn selloff following oil prices lower. But the underlying business fundamentals have continued to improve, especially for the sector’s best in class.

Most important, MLPs as a sector have been taking giant steps toward self-funding growth, limiting and in some cases eliminating dependence on capital markets. Weaker outfits have done this largely by necessity as they’ve been effectively shut out of capital markets, often slashing distributions and spending in the process. And some general partners have pulled the plug on their MLPs entirely with roll-up mergers.

The overall result, however, is sector strength that’s a starker contrast than ever with the investor gloom that continues to hang thick as ever over the entire sector.

Market history shows this kind of dichotomy always resolves itself with higher share prices and improved returns. And that’s exactly what we still expect to see for our recommended MLPs in coming months. The trick to realizing those outsized returns is ensuring our picks stay healthy and being patient enough to wait on others to notice, even if it means absorbing more red ink in the meantime.

In this issue, we highlight the continuing case for hanging onto our MLPs, and even adding to positions in the most promising recommendations. Note that we’ve updated the MLP Ratings table on the website with third quarter results for all 82 midstreamers in our coverage universe, including distribution coverage ratios and other key information.

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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.

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    Elliott and Roger on Nov. 29, 2018

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    Experts

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor