Master limited partnerships (MLP) and exploration and production companies have been among the biggest winners in the sharp rally that has occurred since oil prices bottomed on Feb. 12, with the Alerian MLP Index gaining 35 percent and the Bloomberg North American Exploration & Production Index surging almost 55 percent.
The Bloomberg North American Independent Refining & Marketing Index has also underperformed significantly this year, validating our lack of exposure to this corner of the energy market.
In the MLP universe, the most downtrodden midstream names have outperformed; since oil prices bottomed on Feb. 12, the Yorkville High-Income Infrastructure Index has returned almost 60 percent, while the Alerian MLP Index has gained about 44 percent.
This sharp snapback has narrowed our losses on some of the names in our MLP Portfolio’s aggressive sleeve, though hindsight reminds us that we should have been more proactive about adding positions when valuations reached ludicrously low levels.
Nevertheless, investors who bought our favorite MLPs at dream prices should sit on solid gains. After the recent rally in midstream equities and bonds, investors should continue to focus on high-quality MLPs with superior costs of capital and exposure to low-cost basins that should take market share over the long haul.
Investors who fear that they’ve missed out on the opportunity to buy these MLPs should keep their eyes peeled for the inevitable dips to add to their positions.
Your complete guide to energy investing, from growth stocks to high-yielders.
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 Jul. 27, 2022