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  • Roger S. Conrad

Sector Fear Takes a Breather, Quality Still Key

By Elliott H. Gue on Aug. 24, 2019

The fear factor appears to have lessened a bit since our previous Energy and Income Advisor issue. But with all eyes still on the global economy, these still aren’t especially good times for energy stocks, many of which are pricing in a big future drop in oil.

The Alerian MLP Infrastructure Index, for example, is lower by more than 10 percent in barely a month. That’s despite the generally robust second quarter results of most index components, as well as multiple dividend increases.

For readers interested in betting on a rebound through mutual funds or ETFs, we suggest taking a look at closed-end funds like Kayne Anderson MLP Midstream (NYSE: KYN). Not only are its top holdings arguably over-discounted to otherwise solid prospects but it trades at a discount to net asset value of more than 10 percent. That’s double leverage to a recovery in MLPs, though there’s risk as well: The fund cut its monthly payout by 20 percent at the start of 2019.

We believe a well-chosen portfolio of energy stocks offers far greater potential upside at lower risk than any fund or ETF. One reason is this is still a market where weaker sector companies carry huge downside risk. Going for average in other words is still very dangerous, despite the enormous yields now offered by numerous sector stocks including more than a few with solid distribution coverage.

As we noted in the previous issue as well as our August 9 Alert “Fear Rules But Q2 Earnings Measure Up,” we’re generally pleased by our recommendations’ business performance at this time. We’re also convinced they’re in good shape to weather another drop in energy prices and even an economic recession.

Energy & Income Advisor

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.

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

    • Roger S. Conrad

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