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Investing Topics: MLPs

Staying Focused

In the previous issue of Energy & Income Advisor, we reviewed the performance of our Focus List in the second quarter and the first half of 2013 and made a few changes, swapping out shares of marine-seismic provider Petroleum Geo-Services (Oslo: PGS, OTC: PGSVY) and small-cap contract driller Pacific Drilling (NYSE: PACD). Our high-grading of the Focus List continues.

Growing Pains: MLPs Go Mainstream

The rhetoric underpinning many of the more than 60 presentations that we attended at the National Association of Publicly Traded Partnership’s annual investor conference was remarkably similar.

Midstream master limited partnerships repeatedly emphasized the progress they’d made increasing fee-based revenue and insulating cash flow against swings in commodity prices.

Meanwhile, management teams also highlighted their firms’ positions in the best shale plays, the number of blue-chip energy producers with which they have contracts, their low-risk expansion plans and forecasts for distribution growth.

To filter the barrage of information we gleaned during these presentations and subsequent breakout sessions with management teams, we opted to focus on two criteria: an MLP’s prospects for growth and its relative valuation. Over the course of two jam-packed days of presentations and meetings, we identified eight MLPs that trade at reasonable valuations across the risk spectrum. 

Profit from General Knowledge

Income-seeking investors should consider the universe of pure-play general partners, a niche segment that comprises 12 names–six corporations and six publicly traded partnerships or limited liability companies. Although these names generally sport lower yields than the limited partnerships they manage, their superior distribution growth can generate impressive total returns. 

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    • 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