Panic Over

After the a huge rally lasting more than four months, May ended cruelly for MLPs as interest rate worries prompted profit-taking. The first half of June continued in the same vein — and then the doubts passed as suddenly as they arived.

Was it some new certainty about interest rates? Hardly: Rates kept on rising as a steady but unspectacular growth sufficed to scare investors out of bonds.

Maybe all that changed was that the MLPs ran out of weak hands wanting out, washing out the speculative froth but keeping gains based on the industry’s relatively rapid growth.

There were highs and lows, with two MLPs with a sponsor in common soaring on hopes of further dropdowns and bigger distributions, even as Linn Energy (Nasdaq: LINE) got dumped wholesale on news of an accounting probe.

But on the whole the month-to-date produced many more winners than losers, and a decided preference for distribution growth backed by long-established franchises over speculative high yields. This was one of the themes highlighted here two months ago, and will likely remain a guiding principle of our portfolio management.

The Portfolio Update this month recaps the past month’s trading action of every portfolio holding, along with other relevant news.

This month’s Best Buys include a portfolio holding unjustly tarnished by Linn’s troubles along with a new coal mining MLP pick leveraged to higher natural gas prices.

In Focus recaps Linn’s story and highlights the investing lessons it teaches.

Sector Spotlight considers MLP-related ETFs and ETNs and finds a single vehicle worth considering at the moment.

So far July has started as enticingly as May. Here’s hoping for a happier ending. Higher rates or not, MLPs operate in one of the most dynamic sectors of the global economy. And you need only look at the performance of this month’s big portfolio winners to appreciate how much investors value genuine growth stories that pay regular dividends.


Stock Talk

Gene O'brien

Gene O'brien

I thought you were very late on advice for LINE.

Theresa Smiley

Theresa Smiley

Personally, I see LINN’s current situation as a buying opportunity, which I have taken advantage of.

TC Investments

Andrew Trautmann

I also picked up Linn at $21 and Berry at $39. By the time the sell call went out it was too late . Perhaps it is all about the Berry merger, if you read the SEC disclosure from Berry it refers to the preservation of documents relating to the merger. Some large bullish call-spread bets on Linn rebound .

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