We understand investors’ pessimism toward MLPs. Including distributions, the Alerian MLP Index has performed poorly this year. Although sentiment toward midstream MLPs remains weak, the doom and gloom gives savvy investors an opportunity to lock in above-average yields on high-quality names that stand to benefit as US onshore oil and gas production takes market share over time.
Although our outlook for oil prices and the US energy patch favors an overweight position in core midstream holdings, nimble investors can generate alpha in upstream names by buying when oil prices retreat to the low end of their range and taking some profits off the table when they recover.
Third-quarter earnings season is in full swing. One of our favorite utility stocks earns a higher buy target, while our two master limited partnerships (MLP) continue to generate excess cash flow, enabling them to reduce their reliance on the equity market for fresh capital.
What could take utility stocks down a peg? At the end of the day, a rotation out of dividend-paying stocks could pose the biggest risk. These realities mean that active investors should stay disciplined and be nimble; volatility creates pain—and opportunities.
In an environment where energy prices remain lower for longer and short-cycle US onshore plays take market share, midstream MLPs with the best growth prospects remain some of our favorite picks. Do recent IPOs represent good investment opportunities?
DISCLAIMER: Capitalist Times, LLC is a publisher of financial news and opinions and NOT a securities broker/dealer or an investment advisor. You are responsible for your own investment decisions. All information contained in our newsletters or on our website(s) should be independently verified with the companies mentioned, and readers should always conduct their own research and due diligence and consider obtaining professional advice before making any investment decision. As a condition to accessing Capitalist Times materials and websites, you agree to our Terms and Conditions of Use, available here including without limitation all disclaimers of warranties and limitations on liability contained therein. Owners, employees and writers may hold positions in the securities that are discussed in our newsletters or on our website.